α7 nicotinic acetylcholine receptors (nAChRs) are widely expressed in the brain where they promote fast cholinergic synaptic transmission and serve important neuromodulatory functions. However, their high permeability to Ca2+also predisposes them to contribute to disease states. Here, using transfected HEK-tsa cells and primary cultured hippocampal neurons from male and female rats, we demonstrate that two proteins called Ly6h and NACHO compete for access to α7 subunits, operating together but in opposition to maintain α7 assembly and activity within a narrow range that is optimal for neuronal function and viability. Using mixed gender human temporal cortex and cultured hippocampal neurons from rats we further show that this balance is perturbed during Alzheimer's disease (AD) because of amyloid β (Aβ)-driven reduction in Ly6h, with severe reduction leading to increased phosphorylated tau and α7-mediated neurotoxicity. Ly6h release into human CSF is also correlated with AD severity. Thus, Ly6h links cholinergic signaling, Aβ and phosphorylated tau and may serve as a novel marker for AD progression.SIGNIFICANCE STATEMENTOne of the earliest and most persistent hypotheses regarding Alzheimer's disease (AD) attributes cognitive impairment to loss of cholinergic signaling. More recently, interest has focused on crucial roles for amyloid β (Aβ) and phosphorylated tau in Alzheimer's pathogenesis. Here, we demonstrate that these elements are linked by Ly6h and its counterpart, NACHO, functioning in opposition to maintain assembly of nicotinic acetylcholine receptors (nAChRs) within the physiological range. Our data suggests that Aβ shifts the balance away from Ly6h and toward NACHO, resulting in increased assembly of Ca2+-permeable nAChRs and thus a conversion of basal cholinergic to neurotoxic signaling.