Patients suffering from schizophrenia are known to show an increased prevalence of nicotine addiction. The aim of this paper is to elucidate the relationship between schizophrenia and (chronic) use of nicotine. Nicotine seems to improve cognitive functions critically affected in schizophrenia, in particular sustained attention, focused attention, working memory, short-term memory, and recognition memory. Furthermore, several studies using evoked potentials (P50 paradigm) and prepulse inhibition of the acoustic startle reflex suggest that deficient preattentive information processing, a core feature of schizophrenia illness, is improved following treatment with nicotine. Smoking can also improve extrapyramidal secondary effects of antipsychotic medication and it induces cytochrome P4501A2, an enzyme system involved in the metabolism of several antipsychotics. There is substantial evidence that nicotine could be used by patients with schizophrenia as a "self-medication" to improve deficits in attention, cognition, and information processing and to reduce side effects of antipsychotic medication. Possible pharmacotherapeutic approaches for the regulation of abnormal neurotransmission at nicotinic acetylcholine receptors are discussed.