The medial habenula (MHb) exhibits exceptionally high levels of nicotinic acetylcholine receptors (nAChRs), but it remains unclear whether all expressed nAChR subunit mRNAs are translated to form functional receptors. In particular alpha4 subunits have not been reported to have any functional role, despite strong alpha4 mRNA expression in the ventrolateral MHb. We studied a strain of knock-in mice expressing fluorescent alpha4* nAChRs (alpha4YFP), as well as a knock-in strain expressing hypersensitive alpha4* nAChRs (alpha4L9'A). In alpha4YFP mice, there was strong fluorescence in the ventrolateral MHb. In hypersensitive alpha4L9'A mice, injections of a low dose of nicotine (0.1 mg/kg) led to strong c-fos expression in only the ventrolateral region of the MHb, but not in the MHb of wild-type (WT) mice. In MHb slice recordings, ventrolateral neurons from alpha4L9'A mice, but not from WT mice, responded robustly to nicotine (1 microM). Neurons in the medial aspect of the MHb had >10-fold smaller responses. Thus alpha4* nAChRs contribute to the selective activation of a subset of MHb neurons. Subunit composition analysis based on gain-of-function knock-in mice provides a useful experimental paradigm.