Multiple lines of evidence, from molecular and cellular to epidemiological, have implicated nicotinic transmission in the pathogenesis of Alzheimer's disease (AD). Here we show the signal transduction mechanism involved in nicotinic receptor-mediated protection against beta-amyloid-enhanced glutamate neurotoxicity. Nicotine-induced protection was suppressed by an alpha7 nicotinic receptor antagonist (alpha-bungarotoxin), a phosphatidylinositol 3-kinase (PI3K) inhibitor (LY294002 and wortmannin), and a Src inhibitor (PP2). Levels of phosphorylated Akt, an effector of PI3K, and Bcl-2 were increased by nicotine. The alpha7 nicotinic receptor was physically associated with the PI3K p85 subunit and Fyn. These findings indicate that the alpha7 nicotinic receptor transduces signals to PI3K in a cascade, which ultimately contributes to a neuroprotective effect. This might form the basis of a new treatment for AD.