Neuronal nAChRs in the medial habenula (MHb) to the interpeduncular nucleus (IPN) pathway are key mediators of nicotine's aversive properties. In this paper, we report new details regarding nAChR anatomical localization and function in MHb and IPN. A new group of knock-in mice were created that each expresses a single nAChR subunit fused to GFP, allowing high-resolution mapping. We find that ␣3 and 4 nAChR subunit levels are strong throughout the ventral MHb (MHbV). In contrast, ␣6, 2, 3, and ␣4 subunits are selectively found in some, but not all, areas of MHbV. All subunits were found in both ChAT-positive and ChAT-negative cells in MHbV. Next, we examined functional properties of neurons in the lateral and central part of MHbV (MHbVL and MHbVC) using brain slice patch-clamp recordings. MHbVL neurons were more excitable than MHbVC neurons, and they also responded more strongly to puffs of nicotine. In addition, we studied firing responses of MHbVL and MHbVC neurons in response to bath-applied nicotine. Cells in MHbVL, but not those in MHbVC, increased their firing substantially in response to 1 M nicotine. Additionally, MHbVL neurons from mice that underwent withdrawal from chronic nicotine were less responsive to nicotine application compared with mice withdrawn from chronic saline. Last, we characterized rostral and dorsomedial IPN neurons that receive input from MHbVL axons. Together, our data provide new details regarding neurophysiology and nAChR localization and function in cells within the MHbV.