Schizophrenic patients are thought to have an impaired ability to process sensory information. This deficit leads to disrupted auditory gating measured electrophysiologically as a reduced suppression of the second of paired auditoryevoked responses (P50) and is proposed to be associated with decreased function and/or expression of the homomeric alpha7 nicotinic acetylcholine receptor (nAChR). Here, we provide evidence that N-[(3R)-1-azabicyclo[2.2.2]oct-3-yl]-4-chlorobenzamide hydrochloride (PNU-282987), a novel selective agonist of the alpha7 nAChR, evoked whole-cell currents from cultured rat hippocampal neurons that were sensitive to the selective alpha7 nAChR antagonist methyllycaconitine (MLA) and enhanced GABAergic synaptic activity when applied to hippocampal slices. Amphetamine-induced sensory gating deficit, determined by auditory-evoked potentials in hippocampal CA3 region, was restored by systemic administration of PNU-282987 in chloral hydrate-anesthetized rats. Auditory gating of rat reticular thalamic neurons was also disrupted by amphetamine; however, PNU-282987 normalized gating deficit only in a subset of tested neurons (6 of 11). Furthermore, PNU-282987 improved the inherent hippocampal gating deficit occurring in a subpopulation of anesthetized rats, and enhanced amphetamine-induced hippocampal oscillation. We propose that the alpha7 nAChR agonist PNU-282987, via modulating/enhancing hippocampal GABAergic neurotransmission, improves auditory gating and enhances hippocampal oscillatory activity. These results provide further support for the concept that drugs that selectively activate alpha7 nAChRs may offer a novel, potential pharmacotherapy in treatment of schizophrenia.