The amygdala is involved in processing incoming information about rewarding stimuli and emotions that denote danger such as anxiety and fear. Bi-directional neural connections between basolateral amygdala (BLA) and brain regions such as nucleus accumbens, prefrontal cortex, hippocampus, and hindbrain regions regulate motivation, cognition, and responses to stress. Altered local regulation of BLA excitability is pivotal to the behavioral disturbances characteristic of posttraumatic stress disorder, and relapse to drug use induced by stress. Herein, we review the physiological regulation of BLA by cholinergic inputs, emphasizing the role of BLA nicotinic receptors. We review BLA-dependent effects of nicotine on cognition, motivated behaviors, and emotional states, including memory, taking and seeking drugs, and anxiety and fear in humans and animal models. The alterations in BLA activity observed in animal studies inform human behavioral and brain imaging research by enabling a more exact understanding of altered BLA function. Converging evidence indicates that cholinergic signaling from basal forebrain projections to local nicotinic receptors is an important physiological regulator of BLA and that nicotine alters BLA function. In essence, BLA is necessary for behavioral responses to stimuli that evoke anxiety and fear; reinstatement of cue-induced drug seeking; responding to second-order cues conditioned to abused drugs; reacquisition of amplified nicotine self-administration due to chronic stress during abstinence; and to promote responding for natural reward.