Schizophrenia can be partially characterized by deficits in sensory processing. Biochemical, molecular, and genetic studies of one such endophenotype, the P50 auditory-evoked potential gating deficit, suggest that one of the neuronal nicotinic receptors, the alpha 7 nicotinic receptor, may function in an inhibitory neuronal pathway involved in this phenotype. The P50 deficit is normalized in nongating subjects by nicotine. Although most schizophrenia patients are heavy smokers, the effects of nicotine may be transient, as alpha 7 receptors are known to desensitize rapidly. In an animal model of the P50 gating deficit, antagonists of the alpha 7 nicotinic receptor block normal gating of the second of paired auditory stimuli. Regional localization of receptor expression includes areas known to function in sensory filtering. An inhibitory mechanism, in the hippocampus, may involve nicotinic stimulation of gamma-aminobutyric acid (GABA)ergic interneurons, resulting in decreased response to repetitive stimuli. Expression of the alpha 7 receptor is decreased in hippocampal brain tissue, dissected postmortem, from schizophrenia subjects. The P50 deficit is inherited in schizophrenia pedigrees, but it is not sufficient for disease development and thus represents a predisposition factor. Linkage analysis between the P50 deficit in multiplex schizophrenia pedigrees and deoxyribonucleic acid (DNA) markers throughout the genome yielded positive lod scores to DNA markers mapping to a region of chromosome 15 containing the alpha 7 nicotinic receptor gene. Elucidation of possible interactions of the P50 with other factors, known to be important in the etiology of the disease, is important in determining an overall pathobiology of schizophrenia.