Activation of brain alpha7 nicotinic acetylcholine receptors (alpha7 nAChRs) has broad therapeutic potential in CNS diseases related to cognitive dysfunction, including Alzheimer's disease and schizophrenia. In contrast to direct agonist activation, positive allosteric modulation of alpha7 nAChRs would deliver the clinically validated benefits of allosterism to these indications. We have generated a selective alpha7 nAChR-positive allosteric modulator (PAM) from a library of GABAA receptor PAMs. Compound 6 (N-(4-chlorophenyl)-alpha-[[(4-chloro-phenyl)amino]methylene]-3-methyl-5-isoxazoleacet-amide) evokes robust positive modulation of agonist-induced currents at alpha7 nAChRs, while preserving the rapid native characteristics of desensitization, and has little to no efficacy at other ligand-gated ion channels. In rodent models, it corrects sensory-gating deficits and improves working memory, effects consistent with cognitive enhancement. Compound 6 represents a chemotype for allosteric activation of alpha7 nAChRs, with therapeutic potential in CNS diseases with cognitive dysfunction.