The thalamus plays a critical role in the genesis of thalamocortical oscillations, yet the underlying mechanisms remain elusive. To understand whether the isolated thalamus can generate multiple distinct oscillations, we developed a biophysical thalamic model to test the hypothesis that generation of and transition between distinct thalamic oscillations can be explained as a function of neuromodulation by acetylcholine (ACh) and norepinephrine (NE) and afferent synaptic excitation. Indeed, the model exhibited four distinct thalamic rhythms (delta, sleep spindle, alpha and gamma oscillations) that span the physiological states corresponding to different arousal levels from deep sleep to focused attention. Our simulation results indicate that generation of these distinct thalamic oscillations is a result of both intrinsic oscillatory cellular properties and specific network connectivity patterns. We then systematically varied the ACh/NE and input levels to generate a complete map of the different oscillatory states and their transitions. Lastly, we applied periodic stimulation to the thalamic network and found that entrainment of thalamic oscillations is highly state-dependent. Our results support the hypothesis that ACh/NE modulation and afferent excitation define thalamic oscillatory states and their response to brain stimulation. Our model proposes a broader and more central role of the thalamus in the genesis of multiple distinct thalamo-cortical rhythms than previously assumed.