The α7 subtype of the nicotinic acetylcholine receptor (α7 nAChR) plays an essential role in the cholinergic anti-inflammatory pathway that regulates macrophage/microglia function in inflammation. Similar to M1 and M2 macrophages, M1 and M2 microglia exhibit pro-inflammation and anti-inflammation properties, respectively. In the present study, we analyzed function-associated phenotypes to detect the transformation of microglia with activation of α7 nAChRs. We used lentivirus-mediated shRNA to knockdown the expression of α7 nAChR in BV-2 microglia incubated with lipopolysaccharides (LPS, 0.1 μg/mL) and measured the acetylcholine (Ach, 1 μg/mL)-mediated release of cytokines, such as IL-1β, IL-4, IL-6, and IL-10, in the culture supernatant via radioimmunoassay. After stimulation with Ach, the expression of typical biomarkers for different microglia phenotypes, Iba-1 and Arg-1, was determined by cellular immunofluorescence. Furthermore, the expression of signaling molecules, including p38, JAK2/STAT3, PI3K/Akt and miR-124, was analyzed via western blotting and real-time PCR. We found that Ach inhibited LPS-induced IL-1β and IL-6 elevation and promoted IL-4 and IL-10 production and that knockdown of the α7 nAChR abolished these effects of Ach. In addition, Ach decreased LPS-induced Iba-1 expression and increased Arg-1 levels in an α7 nAChR-dependent manner. The LPS-inhibited activation of JAK2/STAT3 and PI3K/Akt was also rescued by Ach, an effect that was blocked by knockdown of the α7 nAChR. In contrast, Ach triggered the phosphorylation of JAK2 and STAT3 that was otherwise inactivated by LPS in BV-2 cells. Finally, the levels of miR-124 and downstream targets C/EBPα and PU.1 were significantly enhanced in LPS-treated BV-2 microglia, and the effect of Ach on this signaling pathway was blocked by α7 nAChR knockdown as expected. Overall, our data demonstrate that activation ofα7 nAChRs inhibits the transformation of M1 microglia and promotes the M2 phenotype, contributing to the modulation of vagus nerve neuroinflammation during several central nervous system diseases.