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Cholinergic dysfunction has been implicated in the pathophysiology of psychosis and psychiatric disorders such as schizophrenia, depression, and bipolar disorder. The basal forebrain (BF) cholinergic nuclei, defined as cholinergic cell groups Ch1-3 and Ch4 (Nucleus Basalis of Meynert; NBM), provide extensive cholinergic projections to the rest of the brain. Here, we examined microstructural neuroimaging measures of the cholinergic nuclei in patients with untreated psychosis (~31 weeks of psychosis, <2 defined daily dose of antipsychotics) and used magnetic resonance spectroscopy (MRS) and transcriptomic data to support our findings. We used a cytoarchitectonic atlas of the BF to map the nuclei and obtained measures of myelin (quantitative T1, or qT1 as myelin surrogate) and microstructure (axial diffusion; AxD). In a clinical sample (n = 85; 29 healthy controls, 56 first-episode psychosis), we found significant correlations between qT1 of Ch1-3, left NBM and MRS-based dorsal anterior cingulate choline in healthy controls while this relationship was disrupted in FEP (p > 0.05). Case-control differences in qT1 and AxD were observed in the Ch1-3, with increased qT1 (reflecting reduced myelin content) and AxD (reflecting reduced axonal integrity). We found clinical correlates between left NBM qT1 with manic symptom severity, and AxD with negative symptom burden in FEP. Intracortical and subcortical myelin maps were derived and correlated with BF myelin. BF-cortical and BF-subcortical myelin correlations demonstrate known projection patterns from the BF. Using data from the Allen Human Brain Atlas, cholinergic nuclei showed significant enrichment for schizophrenia and depression-related genes. Cell-type specific enrichment indicated enrichment for cholinergic neuron markers as expected. Further relating the neuroimaging correlations to transcriptomics demonstrated links with cholinergic receptor genes and cell type markers of oligodendrocytes and cholinergic neurons, providing biological validity to the measures. These results provide genetic, neuroimaging, and clinical evidence for cholinergic dysfunction in schizophrenia.