A series of human and animal investigations has suggested that altered expression and function of the alpha7-nicotinic cholinergic receptor may be responsible for the auditory sensory gating deficit characterized in schizophrenia patients and their relatives as diminished suppression of an auditory-evoked response (P50) to repeated stimuli. This finding, in conjunction with evidence for familial transmission of this sensory gating deficit, suggests a pathogenic role of the gene for the alpha7-nicotinic receptor in schizophrenia. This article considers the possible effects of this dysfunction in a broader context. Not only is this dysfunction consistent with difficulties in sensory gating, but it might also predispose patients to problems with learning efficiency and accuracy. Such learning problems could underlie schizophrenia patients' delusional thinking, hallucinations, and social dysfunction. In addition, heavy smoking in many schizophrenia patients is consistent with the high concentration of nicotine necessary to activate the receptor and with the receptor's extremely rapid desensitization. Finally, the receptor's possible role in cell growth and differentiation should be considered in connection with developmental deficits and other cellular abnormalities in schizophrenia.