Background: It has been shown that chronic stress-induced depression is associated with exaggerated inflammatory response in the brain. Alpha7 nicotinic acetylcholine receptors (alpha 7nAChRs) regulate the cholinergic anti-inflammatory pathway, but the role of cholinergic signaling and alpha 7nAChR in chronic stress has not yet been examined. Methods: In this study, we used a well-documented model of depression in which mice were exposed to 6 h of restraint stress for 21 consecutive days. Components of cholinergic signaling and TLR4 signaling were analyzed in the hippocampus. The main targets of neuroinflammation and neuronal damage were also evaluated after a series of tests for depression-like behavior. Results: Chronic restraint stress (CRS) induced alterations in components of central cholinergic signaling in hippocampus, including increases in choline acetyltransferase protein expression and decreases in nuclear STAT3 signaling. CRS also increased TLR4 signaling activity, interleukin-1 beta, and tumor necrosis factor-alpha expression, microglial activation, and neuronal morphologic changes. Cholinergic stimulation with the alpha 7nAChR agonist DMXBA significantly alleviated CRS-induced depressive-like behavior, neuroinflammation, and neuronal damage, but these effects were abolished by the selective alpha 7nAChR antagonist alpha-bungarotoxin. Furthermore, activation of alpha 7nAChRs restored the central cholinergic signaling function, inhibited TLR4-mediated inflammatory signaling and microglial activity, and increased the number of regulatory T cells in the hippocampus. Conclusions: These findings provide evidence that alpha 7nAChR activation mitigates CRS-induced neuroinflammation and cell death, suggesting that alpha 7nAChRs could be a new therapeutic target for the prevention and treatment of depression.