Suppression of cholinergic receptors and inactivation of the septum impair short-term memory, and disrupt place cell and grid cell activity in the medial temporal lobe (MTL). Location-dependent hippocampal place cell firing during active waking, when the acetylcholine level is high, switches to time-compressed replay activity during quiet waking and slow-wave-sleep (SWS), when the acetylcholine level is low. However, it remains largely unknown how acetylcholine supports short-term memory, spatial navigation, and the functional switch to replay mode in the MTL. In this paper, we focus on the role of the calcium-activated non-specific cationic (CAN) current which is activated by acetylcholine. The CAN current is known to underlie persistent firing, which could serve as a memory trace in many neurons in the MTL. Here, we review the CAN current and discuss possible roles of the CAN current in short-term memory and spatial navigation. We further propose a novel theoretical model where the CAN current switches the hippocampal place cell activity between real-time and time-compressed sequential activity during encoding and consolidation, respectively.