Schizophrenia patients have insufficient inhibitory processing of identical paired auditory stimuli. This deficient "auditory gating" is thought to have physiological relevance, and its severity correlates with certain measures of both positive and negative symptoms. Schizophrenia patients also represent the heaviest smoking population subgroup. Because smoking temporarily normalizes their auditory gating deficit, this may represent a form of self-medication. Although this deficit is unresponsive to treatment with typical antipsychotic drugs, it does respond to the atypical antipsychotic clozapine. The normalization of this deficit by smoking may account for some of the intense drive to smoke that is experienced by schizophrenia patients. However, the normalizing effect of nicotine is transient and is not observed with repeated administration. Auditory gating is modulated by the alpha7 nicotinic receptor subtype, a rapidly desensitizing low-affinity nicotinic receptor. Agents that selectively activate the alpha7 receptor represent a novel class of therapeutic agents for use in the treatment of schizophrenia. Whether selective alpha7 agonists will have beneficial effects on symptoms other than the auditory gating deficit has not yet been established. The first developed alpha7-selective agonist, 3-2,4-dimethoxybenzylidene anabaseine (DMXB-A), normalizes auditory gating in three distinct animal models of the deficit. DMXB-A is a prototype for this potential new drug class, but proof-of-concept for this type of pharmacotherapy will not be available until the completion of planned clinical trials assessing DMXB-A's effects in schizophrenia patients. Additional avenues to the potential normalization of auditory gating deficits are also discussed, focusing on the novel efficacy of clozapine and the potential utility of allosteric modulators of nicotinic receptors.