Physostigmine can potentiate and inhibit neuronal nicotinic receptors, in addition to inhibiting the activity of acetylcholinesterase. We found that receptors containing three copies of the a2 subunit are inhibited by low concentrations of physostigmine in contrast to receptors containing three copies of the a4 subunit that are potentiated. We exploited this observation to determine the regions required for the actions of physostigmine. Chimeric constructs of the a2 and a4 subunits located two regions in the extracellular amino-terminal domain of the subunit: the E loop (a loop of the transmitter-binding domain) and a region closer to the amino-terminus that collectively could completely determine the different effects of physostigmine. Point mutations then identified a single residue, a2(I92) versus a4(R92), that, when combined with transfer of the E loop, could convert the inhibition seen with a2 subunits to potentiation and the potentiation seen with a4 subunits to inhibition. In addition, other point mutations could affect the extent of potentiation or inhibition, indicating that a more extensive set of interactions in the amino-terminal domain plays some role in the actions of physostigmine.