NICOTINE obtained from tobacco can improve learning and memory on various tasks and has been linked to arousal, attention, rapid information processing, working memory, and long-term memories that can cause craving years after someone has stopped smoking^1,2. One likely target for these effects is the hippocampus, a centre for learning and memory that has rich cholinergic innervation and dense nicotinic acetylcholine receptor (nAChR) expression^3–6. During Alzheimer's dementia there are fewer nAChRs and the cholinergic inputs to the hippocampus degenerate⁷. However, there is no evidence for fast synaptic transmission mediated by nAChRs in the hippocampus, and their role is not understood^8,9. Nicotine is known to act on presynaptic nAChRs within the habenula of chick to enhance glutamatergic transmission¹⁰; here we report that a similar mechanism operates in the hippocampus. Measurements of intracellular Ca²⁺ in single mossy-fibre presynaptic terminals indicate that nAChRs containing the α7 subunit can mediate a Ca²⁺ influx that is sufficient to induce vesicular neurotransmitter release. We propose that nicotine from tobacco influences cognition by enhancing synaptic transmission. Conversely, a decreased efficacy of transmission may account for the deficits associated with the loss of cholinergic innervation during Alzheimer's disease.