Recent studies suggest that subtype-selective activators of M(1)/M(4) muscarinic acetylcholine receptors (mAChRs) may offer a novel approach for the treatment of psychotic symptoms associated with schizophrenia and Alzheimer's disease. Previously developed muscarinic agonists have provided clinical data in support of this hypothesis, but failed in clinical development because of a lack of true subtype specificity and adverse effects associated with activation of other mAChR subtypes. We now report characterization of a novel highly selective agonist for the M(1) receptor with no agonist activity at any of the other mAChR subtypes, termed TBPB [1-(1'-2-methylbenzyl)-1,4'-bipiperidin-4-yl)-1H-benzo[d]imidazol-2(3H)-one]. Mutagenesis and molecular pharmacology studies revealed that TBPB activates M(1) through an allosteric site rather than the orthosteric acetylcholine binding site, which is likely critical for its unprecedented selectivity. Whole-cell patch-clamp recordings demonstrated that activation of M(1) by TBPB potentiates NMDA receptor currents in hippocampal pyramidal cells but does not alter excitatory or inhibitory synaptic transmission, responses thought to be mediated by M(2) and M(4). TBPB was efficacious in models predictive of antipsychotic-like activity in rats at doses that did not produce catalepsy or peripheral adverse effects of other mAChR agonists. Finally, TBPB had effects on the processing of the amyloid precursor protein toward the non-amyloidogenic pathway and decreased Abeta production in vitro. Together, these data suggest that selective activation of M(1) may provide a novel approach for the treatment of symptoms associated with schizophrenia and Alzheimer's disease.