Schizophrenia patients exhibit deficits in signaling of the M1 subtype of muscarinic acetylcholine receptor (mAChR) in the prefrontal cortex (PFC) and also display impaired cortical long-term depression (LTD). We report that selective activation of the M1 mAChR subtype induces LTD in PFC and that this response is completely lost after repeated administration of phencyclidine (PCP), a mouse model of schizophrenia. Furthermore, discovery of a novel, systemically active M1 positive allosteric modulator (PAM), VU0453595, allowed us to evaluate the impact of selective potentiation of M1 on induction of LTD and behavioral deficits in PCP-treated mice. Interestingly, VU0453595 fully restored impaired LTD as well as deficits in cognitive function and social interaction in these mice. These results provide critical new insights into synaptic changes that may contribute to behavioral deficits in this mouse model and support a role for selective M1 PAMs as a novel approach for the treatment of schizophrenia.