Alzheimer disease (AD) is characterized by accumulation of the neurotoxic amyloid beta peptide (Abeta) and by the loss of cholinergic neurons and nicotinic acetylcholine receptors (nAChRs) throughout the brain. Direct inhibition of nAChRs by Abeta has also been suggested to contribute to cholinergic dysfunction in AD. In an effort to find ligands capable of blocking Abeta-induced inhibition of nAChRs, we have screened a phage display library to identify peptides that bind to Abeta. Using this approach, we identified a heptapeptide denoted IQ, which binds with nanomolar affinity to Abeta and is homologous to the acetylcholine-binding protein and to most subtypes of nAChRs. Rapid kinetic whole-cell current-recording measurements showed that Abeta inhibits nAChR function in a dose-dependent manner in neuronal differentiated PC12 cells and that nanomolar concentrations of IQ completely block the inhibition by Abeta. These results indicate that the Abeta binding site in nAChRs is homologous to the IQ peptide and that this is a relevant target for Abeta neurotoxicity in AD and, more generally, for the regulation of nAChR function by soluble Abeta in a physiological context. Furthermore, the results suggest that the IQ peptide may be a lead for the development of novel drugs to block the inhibition of nAChRs in AD.