The pedunculopontine nucleus (PPN) has long been considered an interface between the basal ganglia and motor systems, and its ability to regulate arousal states puts the PPN in a key position to modulate behavior. Despite the large amount of data obtained over recent decades, a unified theory of its function is still incomplete. By putting together classical concepts and new evidence that dissects the influence of its different neuronal subtypes on their various targets, we propose that the PPN and, in particular, cholinergic neurons have a central role in updating the behavioral state as a result of changes in environmental contingencies. Such a function is accomplished by a combined mechanism that simultaneously restrains ongoing obsolete actions while it facilitates new contextual associations.