Nicotinic receptors — a family of ligand-gated ion channels that mediate the effects of the neurotransmitter acetylcholine — are among the most well understood allosteric membrane proteins from a structural and functional perspective. There is also considerable interest in modulating nicotinic receptors to treat nervous-system disorders such as Alzheimer's disease, schizophrenia, depression, attention deficit hyperactivity disorder and tobacco addiction. This article describes both recent advances in our understanding of the assembly, activity and conformational transitions of nicotinic receptors, as well as developments in the therapeutic application of nicotinic receptor ligands, with the aim of aiding novel drug discovery by bridging the gap between these two rapidly developing fields.