Nicotinic receptor activation is inextricably linked to desensitization. This duality affects our ability to develop useful therapeutics targeting nicotinic acetylcholine receptor (nAChR). Nicotine and some alpha7-selective experimental partial agonists produce a transient activation of alpha7 receptors followed by a period of prolonged residual inhibition or desensitization (RID). The object of the present study was to determine whether RID was primarily due to prolonged desensitization or due to channel block. To make this determination, we used agents that varied significantly in their production of RID and two alpha7-selective positive allosteric modulators (PAMs): 5-hydroxyindole (5HI), a type 1 PAM that does not prevent desensitization; and 1-(5-chloro-2,4-dimethoxy-phenyl)-3-(5-methyl-isoxanol-3-yl)-urea (PNU-120596), a type 2 PAM that reactivates desensitized receptors. The RID-producing compounds nicotine and 3-(2,4-dimethoxybenzylidene)anabaseine (diMeOBA) could obscure the potentiating effects of 5HI. However, through the use of nicotine, diMeOBA, and the RID-negative compound 3-(2,4-dihydroxybenzylidene)anabaseine (diOHBA) in combination with PNU-120596, we confirmed that diMeOBA produces short-lived channel block of alpha7 but that RID is because of the induction of a desensitized state that is stable in the absence of PNU-120596 and activated in the presence of PNU-120596. In contrast, diOHBA produced channel block but only readily reversible desensitization, whereas nicotine produced desensitization that could be converted into activation by PNU-120596 but no demonstrable channel block. Steady-state currents through receptors that would otherwise be desensitized could also be produced by the application of PNU-120596 in the presence of a physiologically relevant concentration of choline (60 microM), which may be significant for the therapeutic development of type 2 PAMs.