Epidemiological studies have reported that smoking is associated with a lower incidence of Parkinson's disease (PD), leading to theories that smoking in general and nicotine in particular might be neuroprotective. Recent studies suggested cholinergic anti-inflammatory pathway-regulating microglial activation through α7 nicotinic receptors. In the present study, we used lipopolysaccharide (LPS)-induced in vitro and in vivo inflammation models to investigate whether nicotine has a protective effect on the dopaminergic system through an anti-inflammatory mechanism. Nicotine pretreatment considerably decreased microglial activation with significant reduction of tumour necrosis factor (TNF)-α mRNA expression and TNF-α release induced by LPS stimulation. In co-cultures of microglia and mesencephalic neurons, nicotine pretreatment significantly decreased the loss of tyrosine hydroxylase-immunopositive (TH-ip) cells, approximately twice more than the LPS-only treatment. α-Bungarotoxin, an α7 nicotinic acetylcholine receptor subunit-selective blocker, considerably blocked the inhibitory effects of nicotine on microglial activation and TH-ip neuronal loss. Chronic nicotine pretreatment in rats showed that TH-ip neuronal loss induced by LPS stimulation in the substantia nigra was dramatically decreased, which was clearly accompanied by a reduction in the formation of TNF-α. The present study demonstrated that nicotine has a neuroprotective effect on dopaminergic neurons via an anti-inflammatory mechanism mediated by the modulation of microglial activation. Along with various neuroprotective effects of nicotine, the anti-inflammatory mechanism of nicotine could have a major therapeutic implication in the preventive treatment of PD.