Cholinergic changes play a fundamental role in the natural history of dementia with Lewy bodies and Lewy body disease in general. Despite important achievements in the field of cholinergic research, significant challenges remain. We conducted a study with four main objectives: (i) to examine the integrity of cholinergic terminals in newly diagnosed dementia with Lewy bodies; (ii) to disentangle the cholinergic contribution to dementia by comparing cholinergic changes in Lewy body patients with and without dementia; (iii) to investigate the in vivo relationship between cholinergic terminal loss and atrophy of cholinergic cell clusters in the basal forebrain at different stages of Lewy body disease; and (iv) to test whether any asymmetrical degeneration in cholinergic terminals would correlate with motor dysfunction and hypometabolism. To achieve these objectives, we conducted a comparative cross-sectional study of 25 newly diagnosed dementia with Lewy bodies patients (age 74 ± 5 years, 84% male), 15 healthy control subjects (age 75 ± 6 years, 67% male) and 15 Parkinson's disease patients without dementia (age 70 ± 7 years, 60% male). All participants underwent 18F-fluoroetoxybenzovesamicol PET and high-resolution structural MRI. In addition, we collected clinical 18F-fluorodeoxyglucose PET images. Brain images were normalized to standard space and regional tracer uptake and volumetric indices of basal forebrain degeneration were extracted. Patients with dementia showed spatially distinct reductions in cholinergic terminals across the cerebral cortex, limbic system, thalamus and brainstem. Also, cholinergic terminal binding in cortical and limbic regions correlated quantitatively and spatially with atrophy of the basal forebrain. In contrast, patients without dementia showed decreased cholinergic terminal binding in the cerebral cortex despite preserved basal forebrain volumes. In patients with dementia, cholinergic terminal reductions were most severe in limbic regions and least severe in occipital regions compared to those without dementia. Interhemispheric asymmetry of cholinergic terminals correlated with asymmetry of brain metabolism and lateralized motor function. In conclusion, this study provides robust evidence for severe cholinergic terminal loss in newly diagnosed dementia with Lewy bodies, which correlates with structural imaging measures of cholinergic basal forebrain degeneration. In patients without dementia, our findings suggest that loss of cholinergic terminal function occurs 'before' neuronal cell degeneration. Moreover, the study supports that degeneration of the cholinergic system is important for brain metabolism and may be linked with degeneration in other transmitter systems. Our findings have implications for understanding how cholinergic system pathology contributes to the clinical features of Lewy body disease, changes in brain metabolism and disease progression patterns.