The α7 nicotinic acetylcholine receptor (α7 nAChR) is a ligand-gated ion channel characterized by high Ca²⁺ permeability, rapid activation, and rapid desensitization. It is widely expressed in the nervous system and various non-neuronal cell types. α7 nAChR is involved in regulating neuronal excitability, synaptic transmission and plasticity, cognitive function, and inflammatory responses. These properties have made α7 nAChR a potential therapeutic target for neuropsychiatric and inflammatory diseases. In recent years, advances in cryo-electron microscopy have provided structural insights into α7 nAChR gating, ligand recognition, allosteric modulation, and allosteric activation. The receptor mainly undergoes transitions among resting, open, and desensitized states. Recent structural studies have further revealed asymmetric conformational changes and multiple intermediate states during receptor activation and recovery from desensitization. Conformational rearrangements in the extracellular domain-transmembrane domain coupling region and the pore-forming M2 helices are closely associated with channel opening and desensitization. However, structural characterization of the α7 nAChR gating cycle still largely depends on pharmacological stabilization. Open-state structures have been resolved in the presence of PNU-120596 or GAT107, whereas a high-resolution structure of the open state induced by acetylcholine alone remains to be determined. These physiological roles underpin the involvement of α7 nAChR in multiple disease processes. In the hippocampus, α7 nAChR regulates local neuronal circuits, theta oscillations, synaptic transmission, and synaptic plasticity, thereby contributing to learning, memory, attention, and other cognitive processes. In macrophages, microglia, and other immune-related cells, α7 nAChR activation regulates inflammatory responses and oxidative stress. These effects involve several signaling pathways, including Janus kinase 2 (JAK2)/STAT3, phosphoinositide 3-kinase (PI3K)/AKT, and NF-κB signaling, as well as regulation of the NLRP3 inflammasome and IL-1β production. Such anti-inflammatory effects may also contribute to α7 nAChR-mediated neuroprotection. Although several compounds targeting α7 nAChR have entered clinical studies, no α7 nAChR-selective drug has been approved for clinical use. Limited clinical translation may be related to rapid receptor desensitization, inconsistent efficacy across clinical studies, insufficient or variable target engagement, patient heterogeneity, and clinical endpoint selection. TC-5619 showed promising effects on cognitive impairment and negative symptoms in an early exploratory study of schizophrenia, but these effects were not confirmed in a subsequent, larger phase II trial. Encenicline (EVP-6124) also showed cognitive improvement in early studies, whereas two global phase III trials in schizophrenia failed to meet their co-primary cognitive and functional endpoints. Pharmacological strategies targeting α7 nAChR have expanded from orthosteric agonists to positive allosteric modulators (PAMs) and allosteric agonist-positive allosteric modulators (ago-PAMs). Orthosteric agonists directly activate the receptor by binding to the orthosteric site, but their effects are limited by rapid receptor desensitization. Type I PAMs mainly enhance agonist-evoked responses with relatively small effects on desensitization, whereas type II PAMs markedly potentiate receptor responses and reduce or delay desensitization. Ago-PAMs such as GAT107 can directly activate α7 nAChR through an allosteric mechanism while also potentiating responses to orthosteric agonists. Together, these findings have broadened the pharmacological approaches to α7 nAChR regulation. In summary, future drug development should focus on precise regulation of α7 nAChR according to receptor structure and disease mechanisms, rather than simply enhancing receptor activation. Further studies are needed to clarify how candidate ligands affect receptor gating, conformational transitions, recovery from desensitization, and downstream signaling. Pharmacological differences between neuronal and non-neuronal α7 nAChRs, between homomeric α7 and heteromeric α7β2 receptors, and between α7 nAChR and other nAChR subtypes also require further investigation. Integrating structure prediction, artificial intelligence-assisted virtual screening, molecular docking, molecular dynamics simulations, and electrophysiological validation may facilitate the discovery and optimization of new α7 nAChR modulators.