Single channel studies carried out in cultured rat myoballs and cultured hippocampal neurons, and ion flux studies performed on Torpedo electrocyte membrane vesicles, showed that physostigmine (Phy), a well-established acetylcholinesterase inhibitor, interacts directly with nicotinic acetylcholine receptors (nAChR). Low concentrations (0.1 microM) of Phy activate the receptor integral channel, whereas higher concentrations blocked the channel in its opened state. In contrast to channel activation by acetylcholine (ACh) and classical cholinergic agonists, however, Phy was capable of activating the nAChR channel even when the ACh binding sites were blocked by competitive antagonists, such as alpha-neurotoxins and d-tubocurarine, or when the nAChR was desensitized by preincubation with high concentrations of ACh. The binding site at which Phy binds and activates the nAChR was mapped. It was located within the N-terminal extracellular region of the alpha-polypeptide, in close proximity to the binding site of the natural transmitter. These data identify a novel binding site at nAChRs from many species and tissues that may be involved in receptor regulatory processes.