The clinical development of selective alpha-7 nicotinic acetylcholine receptor (α7 nAChR) agonists has hitherto been focused on disorders characterized by cognitive deficits (e.g., Alzheimer’s disease, schizophrenia). However, α7 nAChRs are also widely expressed by cells of the immune system and by cells with a secondary role in pathogen defense. Activation of α7 nAChRs leads to an anti-inflammatory effect. Since sterile inflammation is a frequently observed phenomenon in both psychiatric disorders (e.g., schizophrenia, melancholic and bipolar depression) and neurological disorders (e.g., Alzheimer’s disease, Parkinson’s disease, and multiple sclerosis), α7 nAChR agonists might show beneficial effects in these central nervous system disorders. In the current review, we summarize information on receptor expression, the intracellular signaling pathways they modulate and reasons for receptor dysfunction. Information from tobacco smoking, vagus nerve stimulation, and cholinesterase inhibition is used to evaluate the therapeutic potential of selective α7 nAChR agonists in these inflammation-related disorders.