The major addictive component of tobacco, nicotine, exerts anti-inflammatory effects in multiple cell types and may benefit neurons in various degenerative disorders, such as Alzheimer's and Parkinson's disease, in which an inflammation-related mechanism is implicated. Among the various nicotinic acetylcholine receptors, α7, which has been identified in both neurons and immune cells and has high permeability to calcium, is believed to contribute significantly to nicotinic anti-inflammatory and neuron-protective effects. Although nicotine has been used in clinical trials for the treatment of some inflammatory diseases such as ulcerative colitis, the molecular mechanisms of its actions are largely unknown. In this review, we provide current evidence for nicotine's modulation of multiple immune pathways via α7 nAChRs in both neurons and immune cells. Understanding the mechanism of the nicotinic anti-inflammatory effect and neuron-protective function may guide the development of novel medicines for infectious and neuron-degenerative diseases.