Neuronal and network-level hyperexcitability is commonly associated with increased levels of amyloid-β (Aβ) and contribute to cognitive deficits associated with Alzheimer's disease (AD). However, the mechanistic complexity underlying the selective loss of basal forebrain cholinergic neurons (BFCNs), a well-recognized characteristic of AD, remains poorly understood. In this study, we tested the hypothesis that the oligomeric form of amyloid-β (oAβ42), interacting with α7-containing nicotinic acetylcholine receptor (nAChR) subtypes, leads to subnucleus-specific alterations in BFCN excitability and impaired cognition. We used single-channel electrophysiology to show that oAβ42 activates both homomeric α7- and heteromeric α7β2-nAChR subtypes while preferentially enhancing α7β2-nAChR open-dwell times. Organotypic slice cultures were prepared from male and female ChAT-EGFP mice, and current-clamp recordings obtained from BFCNs chronically exposed to pathophysiologically relevant level of oAβ42 showed enhanced neuronal intrinsic excitability and action potential firing rates. These resulted from a reduction in action potential afterhyperpolarization and alterations in the maximal rates of voltage change during spike depolarization and repolarization. These effects were observed in BFCNs from the medial septum diagonal band and horizontal diagonal band, but not the nucleus basalis. Last, aged male and female APP/PS1 transgenic mice, genetically null for the β2 nAChR subunit gene, showed improved spatial reference memory compared with APP/PS1 aged-matched littermates. Combined, these data provide a molecular mechanism supporting a role for α7β2-nAChR in mediating the effects of oAβ42 on excitability of specific populations of cholinergic neurons and provide a framework for understanding the role of α7β2-nAChR in oAβ42-induced cognitive decline.