The Erythrina alkaloids erysodine and dihydro-beta-erythroidine (DHbetaE) are potent and selective competitive inhibitors of alpha4beta2 nicotinic acetylcholine receptors (nAChRs), but little is known about the molecular determinants of the sensitivity of this receptor subtype to inhibition by this class of antagonists. We addressed this issue by examining the effects of DHbetaE and a range of aromatic Erythrina alkaloids on [(3)H]cytisine binding and receptor function in conjunction with homology models of the alpha4beta2 nAChR, mutagenesis, and functional assays. The lactone group of DHbetaE and a hydroxyl group at position C-16 in aromatic Erythrina alkaloids were identified as major determinants of potency, which was decreased when the conserved residue Tyr126 in loop A of the alpha4 subunit was substituted by alanine. Sensitivity to inhibition was also decreased by substituting the conserved aromatic residues alpha4Trp182 (loop B), alpha4Tyr230 (loop C), and beta2Trp82 (loop D) and the nonconserved beta2Thr84; however, only alpha4Trp182 was predicted to contact bound antagonist, suggesting alpha4Tyr230, beta2Trp82, and beta2Thr84 contribute allosterically to the closed state elicited by bound antagonist. In addition, homology modeling predicted strong ionic interactions between the ammonium center of the Erythrina alkaloids and beta2Asp196, leading to the uncapping of loop C. Consistent with this, beta2D196A abolished sensitivity to inhibition by DHbetaE or erysodine but not by epierythratidine, which is not predicted to form ionic bonds with beta2Asp196. This residue is not conserved in subunits that comprise nAChRs with low sensitivity to inhibition by DHbetaE or erysodine, which highlights beta2Asp196 as a major determinant of the receptor selectivity of Erythrina alkaloids.