Rapid habituation of the evoked response to repeated auditory stimuli is a physiological manifestation of sensory gating mechanisms that are disturbed in human psychoses. Similar deficits are found in two animal models: fimbria-fornix lesioned Sprague-Dawley rats and DBA/2 mice, an inbred strain with decreased numbers of hippocampal alpha 7 nicotinic receptors. In response to paired auditory stimuli, the hippocampal evoked response of outbred, unlesioned animals is larger to the first than to the second stimulus. Both fimbria-fornix lesioned rats and DBA/2 mice have decreased response to the first stimulus but no further suppression of response to the second stimulus. Parenteral administration of (S)-3-methyl-5-(1-methyl-2-pyrrolidinyl) isoxazole (ABT418), a newly developed nicotinic agonist, was found to normalize hippocampal auditory evoked responses in both models. The response to the first stimulus was increased, and the response to the second stimulus was suppressed relative to the first. The magnitude and time course of effect were similar to those observed with a 10-fold greater dose of nicotine. Both nicotine and ABT418 were ineffective when a second dose was administered 1 h later, suggesting that both compounds may desensitize the receptor mechanism.