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Fluid percussion injury (FPI) causes memory deficits, loss of hippocampal neurons, and basal forebrain cholinergic immunoreactivity in rats. Basal forebrain septohippocampal projections terminate in specific hippocampal regions. The purpose of this study was to examine the effects of FPI on the septohippocampal pathway (SHP). Halothane-anesthetized rats received either a sham injury or a parasagittal FPI. To characterize the anatomical effects of FPI on the SHP, silver stains were performed on brains of animals at 1, 5, and 10 days following FPI and were compared to sham-injured preparations. To characterize the effects of FPI on retrograde transport in the SHP, a separate group of FPI and sham-injured animals with survival times of 2, 5, and 10 days received bilateral WGA-HRP injections into the hippocampal formation 24 h prior to sacrifice. Argyrophilic CA3 neurons were present 1 day following FPI. Five days following FPI, terminal degeneration was present in the inner third of the molecular layer of the dentate gyrus bilaterally that was not present 1 day after injury. Fiber and terminal degeneration was not observed in the basal forebrain until 10 days after FPI. WGA-HRP-labeled septal neurons decreased significantly (P < 0.05) ipsilateral to injury in animals sacrificed 5 and 10 days following FPI but not 2 days after injury. This investigation demonstrated that FPI produces focal injury in the hippocampal formation. In addition, the appearance of terminal degeneration in the dentate molecular layer correlated with the significant reduction in axonal transport 5 days following injury. This correlation illustrates the secondary processes that structurally damage the SHP up to 10 days after injury.