Patients with schizophrenia often cannot respond to important features of their environment and filter out irrelevant stimuli. This dysfunction could be related to an underlying defect in inhibition--i.e., the brain's ability to alter its sensitivity to repeated stimuli. One of the neuronal mechanisms responsible for such inhibitory gating involves the activation of cholinergic nicotinic receptors in the hippocampus. These receptors are diminished in many specimens of hippocampal brain tissue obtained postmortem from schizophrenic patients. In living schizophrenic patients, stimulation of cholinergic receptors by nicotine transiently restores inhibitory gating of evoked responses to sensory stimuli. Many people with schizophrenia are heavy smokers, but the properties of the nicotinic receptor favor only short-term activation, which may explain why cigarette smoking is only a transient symptomatic remedy. This paper reviews the clinical phenomenology of inhibitory gating deficits in people with schizophrenia, the neurobiology of such gating mechanisms, and the evidence that some individuals with the disorder may have a heritable deficit in the nicotinic cholinergic receptors involved in this neurobiological function. Inhibitory gating deficits are only partly normalized by neuroleptic drugs and are thus a target for new therapeutic strategies for schizophrenia.