It is hypothesized that desensitization of neuronal nicotinic acetylcholine receptors (nAChRs) induced by chronic exposure to nicotine initiates upregulation of nAChR number. To test this hypothesis directly, oocytes expressing α4β2 receptors were chronically incubated (24-48 hr) in nicotine, and the resulting changes in specific [3H]nicotine binding to surface receptors on intact oocytes were compared with functional receptor desensitization. Four lines of evidence strongly support the hypothesis. (1) The half-maximal nicotine concentration necessary to produce desensitization (9.7 nM) was the same as that needed to induce upregulation (9.9 nM). (2) The concentration of [3H]nicotine for half-maximal binding to surface nAChRs on intact oocytes was also similar (11.1 nM), as predicted from cyclical desensitization models. (3) Functional desensitization of α3β4 receptors required 10-fold higher nicotine concentrations, and this was mirrored by a 10-fold shift in concentrations necessary for upregulation. (4) Mutant α4β2 receptors that do not recover fully from desensitization, but not wild-type channels, were upregulated after acute (1 hr) applications of nicotine. Interestingly, the nicotine concentration required for half-maximal binding of α4β2 receptors in total cell membrane homogenates was 20-fold lower than that measured for surface nAChRs in intact oocytes. These data suggest that cell homogenate binding assays may not accurately reflect the in vivo desensitization affinity of surface nAChRs and may account for some of the previously reported differences in the efficacy of nicotine for inducing nAChR desensitization and upregulation.