The medial habenula (MHb) exhibits exceptionally high levels of nicotinic acetylcholine receptors (nAChRs), but it remains unclear whether all expressed nAChR subunit mRNAs are translated to form functional receptors. In particular α4 subunits have not been reported to have any functional role, despite strong α4 mRNA expression in the ventrolateral MHb. We studied a strain of knock-in mice expressing fluorescent α4* nAChRs (α4YFP), as well as a knock-in strain expressing hypersensitive α4* nAChRs (α4L9′A). In α4YFP mice, there was strong fluorescence in the ventrolateral MHb. In hypersensitive α4L9′A mice, injections of a low dose of nicotine (0.1 mg/kg) led to strong c-fos expression in only the ventrolateral region of the MHb, but not in the MHb of wild-type (WT) mice. In MHb slice recordings, ventrolateral neurons from α4L9′A mice, but not from WT mice, responded robustly to nicotine (1 μM). Neurons in the medial aspect of the MHb had >10-fold smaller responses. Thus α4* nAChRs contribute to the selective activation of a subset of MHb neurons. Subunit composition analysis based on gain-of-function knock-in mice provides a useful experimental paradigm. © 2008 Elsevier Ltd. All rights reserved.