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For decades, the pathology of Alzheimer's disease has been associated with dysfunction of cholinergic signaling; however, the cellular mechanisms by which nicotinic acetylcholine receptor (nAChR) function is impaired in Alzheimer's disease are as yet unknown. The most significant genetic risk factor for the development of Alzheimer's disease is inheritance of the epsilon4 allele of apolipoprotein E (apoE). Recent data have demonstrated the ability of apoE-derived peptides to inhibit nAChRs in rat hippocampus. In the current study, the functional interaction between nAChRs and apoE-derived peptides was investigated in Xenopus oocytes expressing selected nAChRs. Both a 17-amino acid peptide fragment, apoE133-149, and an eight-amino acid peptide, apoE141-148, were able to maximally block acetylcholine (ACh)-mediated peak current responses for homomeric alpha7 nAChRs. ApoE peptide inhibition was dose-dependent and voltage- and activity-independent. The current findings suggest that apoE peptides are noncompetitive for acetylcholine and do not block functional alpha-bungarotoxin binding. ApoE peptides had a significantly decreased ability to inhibit ACh-mediated peak current responses for alpha4beta2 and alpha2beta2 nAChRs. Amino acid substitutions in the apoE peptide sequence suggest that the arginines are critical for peptide blockade of the alpha7 nAChR. The current data suggest that apoE fragments can disrupt nAChR signaling through a direct blockade of alpha7 nAChRs. These results may be useful in elucidating the mechanisms underlying memory loss and cognitive decline seen in Alzheimer's disease as well as aid in the development of novel therapeutics using apoE-derived peptides.