A potentially major factor in the development of Alzheimer's disease is the enhanced production of soluble beta-amyloid peptide fragments amyloid beta peptide(1-40) and amyloid beta peptide(1-42). These amyloid peptides are generated by cleavage of the amyloid-precursor protein and aggregate spontaneously to form amyloid plaques, which are a classical pathological hallmark in Alzheimer's disease. Although the precise mechanisms are unknown, it is widely believed that amyloid peptides initiate the degenerative process, resulting in subsequent cognitive decline. One interaction of amyloid beta peptide that may contribute to an impairment of cognition is its high affinity binding to the alpha 7 nicotinic receptor; a receptor shown to be important for cognition in a number of studies. There is some controversy, however, whether amyloid beta peptide inhibits or activates this receptor. We have cloned and stably expressed the human alpha 7 receptor and investigated its interaction with amyloid beta peptide using patch clamp electrophysiology. Human alpha 7 was activated in a concentration-dependent fashion by nicotine, acetylcholine and choline and potently inhibited by methyllycaconitine citrate. The responses were inwardly rectifying and exhibited rapid activation, desensitization and deactivation. Amyloid beta peptide(1-42) antagonized human alpha7 responses in a partially reversible fashion; no agonist effects of amyloid beta peptide(1-42) were detected. A similar inhibition of mouse alpha 7 was also observed. In addition, we have assessed the function of native alpha 7 receptors in hippocampal slices prepared from transgenic mice that over-express human amyloid. Despite this clear inhibition of recombinant receptors, hippocampal GABAergic interneurones in slices from beta-amyloid over-expressing mice still possess alpha 7 receptor-mediated currents.