Cholinergic signaling mediated by nicotinic receptors has been associated to a large number of physiological and behavioral processes such as learning, memory, attention, food-intake and mood disorders. Although it is well established that many nicotinic actions are mediated through an increase in serotonin (5-HT) release, the physiological mechanisms by which nicotine produces these effects are still unclear. The dorsal raphe nucleus (DRN) contains the major amount of 5-HT neurons projecting to different parts of the brain. DRN also contains nicotinic acetylcholine receptors (nAChRs) located at somatic and presynaptic elements. Nicotine produces both inhibitory and excitatory effects on different subpopulations of 5-HT DRN neurons. In this review, we describe the presynaptic and postsynaptic mechanisms by which nicotine increases the excitability of DRN neurons as well as the subtypes of nAChRs involved. We also describe the inhibitory effects of nicotine and the role of 5-HT1A receptors in this effect. These nicotinic actions modulate the activity of different neuronal subpopulations in the DRN, changing the 5-HT tone in the brain areas where these groups of neurons project. Some of the physiological implications of nicotine-induced 5-HT release are discussed.