Neuronal ␣-bungarotoxin receptors (BgtRs) are nicotinic receptors that require as yet unidentified post-translational modifications to achieve functional expression. In this study, we examined the role of protein palmitoylation in BgtR expression. BgtR ␣7 subunits are highly palmitoylated in neurons from brain and other cells capable of BgtR expression, such as pheochromocytoma 12 (PC12) cells. In PC12 cells, ␣7 subunits are palmitoylated with a stoichiometry of approximately one palmitate per subunit, and inhibition of palmitoylation blocks BgtR expression. In cells incapable of BgtR expression, such as human embryonic kidney cells, ␣7 subunits are not significantly palmitoylated. However, in these same cells, chimeric subunits with the N-terminal half of ␣7 fused to the C-terminal half of serotonin-3A receptor (␣7/5-HT 3A ) subunits form functional BgtRs that are palmitoylated to an extent similar to that of BgtR ␣7 subunits in PC12 cells. Palmitoylation of PC12 and ␣7/5-HT 3A BgtRs occurred during assembly in the endoplasmic reticulum (ER). In conclusion, our data indicate a function for protein palmitoylation in which palmitoylation of assembling ␣7 subunits in the ER has a role in the formation of functional BgtRs.