The aim of the present study was to investigate if different levels of circulating corticosterone (CORT) modulate the effect of nicotine on prepulse inhibition (PPI), a measure of sensorimotor gating that is disrupted in schizophrenia and other mental illnesses. Four groups of mice were investigated: sham-operated, adrenalectomized (ADX) and implanted with a cholesterol pellet, ADX and implanted with a 10 mg CORT pellet, or ADX and 50 mg of CORT. Different CORT levels or doses of nicotine did not significantly affect startle responses. Baseline PPI was significantly reduced in mice implanted with the highest dose of CORT. In ADX mice implanted with cholesterol, nicotine treatment influenced PPI depending on the prepulse intensity. In ADX mice implanted with 50 mg of CORT, treatment with 10 mg/kg of nicotine caused a significant increase in PPI at all prepulse intensities. Binding studies showed that corticosterone treatment had significantly affected nicotinic acetylcholine receptor (nAChR) density in the mouse brain. Treatment with 50 mg CORT decreased 125I-epibatidine binding in the globus pallidus and 125I-alpha-bungarotoxin binding in the claustrum. These results suggest a possible interaction of corticosterone and nicotine at the level of the alpha4- and alpha7-type nAChR in the regulation of PPI. In situations of high circulating levels of corticosterone, nicotine may be beneficial to restore disruption of PPI.