The hippocampus is an area important for learning and memory and exhibits prominent and behaviourally relevant theta (4-12 Hz) and gamma (30-100 Hz) frequency oscillations in vivo. Hippocampal slices produce similar types of oscillatory activity in response to bath-application of neurotransmitter receptor agonists. The medial septum diagonal band area (MS/DB) provides both a cholinergic and GABAergic projection to the hippocampus, and although it plays a major role in the generation and maintenance of the hippocampal theta rhythm in vivo, there is evidence for intrinsic theta generation mechanisms in the hippocampus, especially in area CA3. The aim of this study was to examine the role of the nicotinic receptor (nAChR) in the induction of oscillatory field activity in the in vitro preparation of the rat hippocampus. Bath-application of a low concentration of nicotine (1 muM) to transversely-cut hippocampal slices produced persistent theta-frequency oscillations in area CA3 of the hippocampus. These oscillations were reduced by both GABA(A) receptor antagonists and ionotropic glutamate receptor antagonists, indicating the involvement of local GABAergic and glutamatergic neurons in the production of the rhythmic theta activity. The nicotine-induced theta activity was inhibited by non-selective nAChR antagonists and partially by an alpha7* nAChR antagonist. The induction of theta frequency oscillations in CA3 by nicotine was mimicked alpha7* nAChR agonists but not by non-alpha7* nAChR agonists. In conclusion, theta activity in the hippocampus may be promoted by tonic stimulation of alpha7* nAChRs, possibly via selective stimulation of theta-preferring interneurons in the hippocampus that express post-synaptic alpha7* nAChRs.