The homopentameric α7 nicotinic receptor (nAChR) is one of the most abundant nAChRs in the nervous system and it is also expressed in many non-neuronal cells. It is involved in a range of neurological, psychiatric and inflammatory disorders and is emerging as a novel drug target. We have combined site-directed mutagenesis and cell expression with single-channel kinetic analysis to delineate molecular mechanisms and structures underlying α7 activation and drug modulation. Enhancement of α7 function by positive allosteric modulators (PAMs) is a promising therapeutic strategy to improve cognitive deficits. PAMs have been classified only on the basis of their macroscopic effects as type I, which only enhance agonist-induced currents, and type II, which also decrease desensitization. To decipher the molecular basis underlying these distinct activities, we explored the effects of representative members of each type on single-channel currents. In the absence of PAMs, single-α7 channels appear as very brief and isolated opening events. Both types of PAMs enhance open-channel lifetime and produce episodes of successive openings, thus indicating that the two affect α7 kinetics. Both PAM types require different structural determinants for their allosteric action and show different sensitivity to temperature, suggesting different mechanisms of potentiation. Due to its homomeric nature, α7 contains five identical agonist binding sites. We developed a strategy that allowed us to determine the number of ACh occupied sites required for activation from the amplitude of each individual single-channel opening. The results revealed that ACh occupancy of only one of α7 five agonist binding sites allows activation and that open-channel lifetime of a single-occupied receptor is indistinguishable from that of receptors containing five intact binding sites. The unique ability to elicit a full biological response with a single-occupied site adapts a7 to volume transmission, a prevalent mechanism of ACh-mediated signaling in the nervous system and non-neuronal cells. α7 is also present in immune cells and it is emerging as an important drug target for inflammation. We found that Natural Killer Cells express functional α7 nAChRs that trigger calcium mobilization. Activation of α7 decreases NF-kB levels and nuclear mobilization, leading to marked anti-inflammatory effects which are evidenced by decreased cell-mediated cytotoxicity and IFN-γ production. Thus, α7 in these cells may constitute a novel target for regulation of the immune response. Deciphering the molecular basis underlying α7 responses has implications for the design of novel and more specific therapeutic compounds.