Substance P is known to modulate neuronal nicotinic acetylcholine receptors (nAChRs) in the sympathetic nervous system. There are two conflicting proposals for the mechanism of this effect, an indirect action mediated by protein kinase C (PKC) and a direct interaction with receptor subunits. We studied the mechanisms of this effect in PC-12 cells. Substance P enhanced the decay of the nicotine-induced whole cell current. This effect was fast in its onset and was not antagonized by guanosine 5'-O-(2-thiodiphosphate), a G protein blocker, or staurosporine, a nonselective PKC blocker. Staurosporine failed to reverse the inhibition by 1-oleoyl-2-acetyl-sn-glycerol (OAG), a synthetic diacylglycerol analog known to activate PKC. The inhibitory effects of the peptide and OAG were preserved in excised patches, but substance P applied to the extra patch membrane was ineffective in the cell-attached patch configuration. We conclude that substance P modulates neuronal nAChRs most likely by direct interactions with the receptors but independently from activation of PKC or G proteins and that PKC does not participate in modulation by OAG.