Children of mothers who smoked during pregnancy are at significantly greater risk for cognitive impairments including memory deficits, but the mechanisms underlying this effect remain to be understood. In rodent models of smoking during pregnancy, early postnatal nicotine exposure results in impaired long-term hippocampus-dependent memory, functional loss of α2-containing nicotinic acetylcholine receptors (α2* nAChRs) in oriens-lacunosum moleculare (OLM) cells, increased CA1 network excitation, and unexpected facilitation of long-term potentiation (LTP) at Schaffer collateral-CA1 synapses. Here we demonstrate that α2 knockout mice show the same pattern of memory impairment as previously observed in wild-type mice exposed to early postnatal nicotine. However, α2 knockout mice and α2 knockout mice exposed to early postnatal nicotine did not share all of the anomalies in hippocampal function observed in wild-type mice treated with nicotine during development. Unlike nicotine-treated wild-type mice, α2 knockout mice and nicotine-exposed α2 knockout mice did not demonstrate increased CA1 network excitation following Schaffer collateral stimulation and facilitated LTP, indicating that the effects are likely adaptive changes caused by activation of α2* nAChRs during nicotine exposure and are unlikely related to the associated memory impairment. Thus, the functional loss of α2* nAChRs in OLM cells likely plays a critical role in mediating this developmental-nicotine-induced hippocampal memory deficit.