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Background: The alpha-7 nicotinic acetylcholine receptor (alpha 7-nAChR) is well known as a potent calcium ionophore that, in the brain, has been implicated in excitotoxicity and hence in the underlying mechanisms of neurodegenerative disorders such as Alzheimer's disease. Previous research implied that the activity of this receptor may be modified by exposure to a peptide fragment derived from the C-terminal region of the enzyme acetylcholinesterase. This investigation was undertaken to determine if the functional changes observed could be attributed to peptide binding interaction with the alpha 7-nAChR, or peptide modulation of receptor expression. Methodology/Principal Findings: This study provides evidence that two peptides derived from the C-terminus of acetylcholinesterase, not only selectively displace specific bungarotoxin binding at the alpha 7-nAChR, but also alter receptor binding properties for its familiar ligands, including the alternative endogenous agonist choline. Of more long-term significance, these peptides also induce upregulation of alpha 7-nAChR mRNA and protein expression, as well as enhancing receptor trafficking to the plasma membrane. Conclusions/Significance: The results reported here demonstrate a hitherto unknown relationship between the alpha 7-nAChR and the non-enzymatic functions of acetylcholinesterase, mediated independently by its C-terminal domain. Such an interaction may prove valuable as a pharmacological tool, prompting new approaches for understanding, and combating, the process of neurodegeneration.