Allosteric modulation refers to the concept that proteins could exist in multiple conformational states and that binding of allosteric ligands alters the energy barriers or "isomerization coefficients" between various states. In the context of ligand gated ion channels such as nicotinic acetylcholine receptors (nAChRs), it implies that endogenous ligand acetylcholine binds at the orthosteric site, and that molecules that bind elsewhere on the nAChR subunit(s) acts via allosteric interactions. For example, studies with the homomeric alpha7 nAChRs indicate that such ligand interactions can be well described by an allosteric model, and that positive allosteric effectors can affect energy transitions by (i) predominantly affecting the peak current response (Type I profile) or, (ii) both peak current responses and time course of agonist-evoked response (Type II profile). The recent discovery of chemically heterogeneous group of molecules capable of differentially modifying nAChR properties without interacting at the ligand binding site illustrates the adequacy of the allosteric model to predict functional consequences. In this review, we outline general principles of the allosteric concept and summarize the profiles of novel compounds that are emerging as allosteric modulators at the alpha7 and alpha4beta2 nAChR subtypes.