Activation of presynaptic nicotinic acetylcholine receptors (nAChRs) can enhance the release of glutamate from synapses in hippocampal slices and cultures. In hippocampal cultures making autaptic connections, rapid application of a high concentration of nicotine activated presynaptic, postsynaptic, and somatic nAChRs, which consequently enhanced the amplitude of evoked excitatory postsynaptic currents (eEPSCs) mediated by glutamate receptors. The increased eEPSC amplitudes arose from enhanced glutamate release caused by presynaptic nAChRs (Radcliffe and Dani, 1998, Journal of Neuroscience 18, 7075). The same whole-cell nicotine applications that enhanced non-NMDA eEPSCs often decreased the NMDA-receptor component of the eEPSCs. Furthermore, whole-cell activation of nAChRs by nicotine selectively reduced the amplitude of the whole-cell NMDA-receptor currents without affecting the non-NMDA receptor currents. The inhibition by nicotine was prevented by the alpha7-specific antagonist, methyllycaconitine, and required the presence of extracellular Ca(2+). The calmodulin antagonist fluphenazine prevented inhibition of the NMDA-receptor current by nAChR activity, suggesting that a Ca(2+)-calmodulin-dependent process mediated the effect of nicotine. Our results indicate that activation of nAChRs can modulate glutamatergic synapses in several ways. Presynaptic nAChR activity enhances synaptic transmission by increasing transmitter release. Additionally, somatic or postsynaptic nAChRs can initiate a Ca(2+) signal that can act via calmodulin to reduce the responsiveness of NMDA receptors.