Spontaneous and sensory-evoked cortical activity is highly state-dependent, promoting the functional flexibility of cortical circuits underlying perception and cognition. Using neural recordings in combination with behavioral state monitoring, we find that arousal and motor activity have complementary roles in regulating local cortical operations, providing dynamic control of sensory encoding. These changes in encoding are linked to altered performance on perceptual tasks. Neuromodulators, such as acetylcholine, may regulate this state-dependent flexibility of cortical network function. We therefore recently developed an approach for dual mesoscopic imaging of acetylcholine release and neural activity across the entire cortical mantle in behaving mice. We find spatiotemporally heterogeneous patterns of cholinergic signaling across the cortex. Transitions between distinct behavioral states reorganize the structure of large-scale cortico-cortical networks and differentially regulate the relationship between cholinergic signals and neural activity. Together, our findings suggest dynamic state-dependent regulation of cortical network operations at the levels of both local and large-scale circuits.