Neuronal nicotinic acetylcholine receptors (nAChRs) are ligand gated ion channels of broad distribution and structural heterogeneity. Their functional diversity demonstrated involvement in a variety of neuronal processes (e.g., sensory gating and cognitive function) and generated great interest in them as targets for therapeutic intervention in a number of neuropathological conditions and diseases. In order to control distinct nicotinic functions pharmacologically, it is important to design ligands that selectively interact with distinct receptor subtypes in such a way as to maximize the therapeutic effect and minimize the adverse effects. The α7 nAChR, a CNS subtype, has been the most intensively studied nAChR in recent years. Selective α7 nAChR agonists have been developed as potential candidates for the treatment of schizophrenia, cognitive disorders (including Alzheimers disease), and inflammation. Despite early concerns that the rapid desensitization property of the α7 nAChR would limit their therapeutic potential, several have already been advanced to clinical trials (e.g., PH-399733, Pfizer; MEM 3454, Memory Pharmaceuticals/Roche). Further development of allosteric modulators and pharmaceutically relevant antagonists might expand the therapeutic potential of compounds that target α7 nAChRs. In this review we briefly describe the structure and function of the α7 nAChR and its in vitro and in vivo pharmacology, discuss the clinical relevance of these efforts, and review the current progress in α7 ligand development.