Background and Purpose Nicotinic ACh receptors containing the alpha 7 sub-unit (alpha 7-nAChRs) suppress inflammation through a wide range of pathways in immune cells. These receptors are thus potentially involved in a number of inflammatory diseases. However, the detailed mechanisms underlying the anti-inflammatory effects of alpha 7-nAChRs remain to be described. Experimental Approach Anti-inflammatory effects of alpha 7-nAChR agonists were assessed in both murine macrophages (RAW 264.7) and bone marrow-derived macrophages (BMDM), stimulated with LPS, using immunoblotting, RT-PCR and luciferase reporter assays. The role of adenylyl cyclase-6 in the degradation of Toll-like receptor 4 (TLR4) following endocytosis, was explored via overexpression and knockdown. A mouse model of chronic obstructive pulmonary disease (COPD) induced by porcine pancreatic elastase was used to confirm key findings. Results Anti-inflammatory effects of alpha 7-nAChRs were largely dependent on adenylyl cyclase-6 activation, as knockdown of adenylyl cyclase-6 considerably reduced the effects of alpha 7-nAChR agonists while adenylyl cyclase-6 overexpression promoted them. We found that alpha 7-nAChRs and adenylyl cyclase-6 are co-localized in lipid rafts of macrophages and directly interact. Activation of adenylyl cyclase-6 led to increased degradation of TLR4. Administration of the alpha 7-nAChR agonist PNU-282987 attenuated pathological and inflammatory end points in a mouse model of COPD. Conclusion and Implications The alpha 7-nAChRs inhibit inflammation through activating adenylyl cyclase-6 and promoting degradation of TLR4. The use of alpha 7-nAChR agonists may represent a novel therapeutic approach for treating COPD and possibly other inflammatory diseases.