Positive allosteric modulators (PAMs) of α7 nicotinic acetylcholine receptors (α7nAChRs) exhibit pro-cognitive effects in animal models of schizophrenia and are targets for the discovery of cognition-enhancing drugs. However, little is known about their in vivo mechanism of action because such studies have been performed in vitro. Here we test the hypothesis that PAMs’ potentiation of glutamate release in prefrontal cortex depends upon the level of endogenous cholinergic activity. NMDA stimulation of the nucleus accumbens shell (0.05–0.30 μg in 0.5 μL) increased extracellular choline (0.87 ± 0.15 – 1.73 ± 0.31 μM) and glutamate (0.15 μg, 3.79 ± 0.87 μM) in medial prefrontal cortex, and the glutamate release was prevented by local infusions of MLA (6.75 μg, 0.19 ± 0.06 μM). The lower dose (1 mg/kg) of AVL3288 (type I) potentiated the glutamate release to a greater degree after the high dose of NMDA (0.30 μg; 84.7% increase vs AVL vehicle) versus the low dose of NMDA (0.05 μg; 24.2% increase), whereas glutamate release was inhibited when the high dose of NMDA was combined with the high dose of AVL3288 (64.2% decrease). In contrast, PNU120596 (type II) only potentiated glutamate release when the high dose (9 mg/kg) was combined with the low dose of NMDA (0.05 μg; 211% increase from PNU vehicle). Collectively, the results suggest a potential in vivo mechanism for the pro-cognitive effects of PAMs and provide the proof-of-concept for the continued focus on allosteric modulation of cortical α7nAChRs for cognition-enhancing drug development.