A primary function of the brain is to form representations of the sensory world. Its capacity to do so depends on the relationship between signal correlations, associated with neuronal receptive fields, and noise correlations, associated with neuronal response variability. It was recently shown that the behavioral relevance of sensory stimuli can modify the relationship between signal and noise correlations, presumably increasing the encoding capacity of the brain. In this work, we use data from the visual cortex of the awake mouse watching naturalistic stimuli and show that a similar modification is observed under heightened cholinergic modulation. Increasing cholinergic levels in the cortex through optogenetic stimulation of basal forebrain cholinergic neurons decreases the dependency that is commonly observed between signal and noise correlations. Simulations of correlated neural networks with realistic firing statistics indicate that this change in the correlation structure increases the encoding capacity of the network.