The effect of the neuropeptide substance P on the binding of the cholinergic ligands to the nicotinic acetylcholine receptor of Torpedo electroplaque membranes was examined at a physiological concentration of NaCl (150 mM). Substance P had no effect on the initial rate of 125I-alpha-bungarotoxin binding at concentrations of < 100 microM. The peptide did not bind to the high-affinity local anesthetic site but allosterically modulated [3H]phencyclidine binding, positively in the absence of agonist and negatively in the presence of agonist. Substance P increased the apparent affinity of the cholinergic agonists carbamylcholine and acetylcholine at equilibrium. The effect of substance P on the equilibrium binding of [3H]acetylcholine was examined directly, and the peptide appeared to increase the affinity of the binding of the second molecule of agonist, with no effect on the binding of the first. This indicates that substance P can affect the cooperative interactions between agonist binding sites. Substance P appeared to increase the rate of carbamylcholine-induced desensitization; however, the data are also consistent with an allosteric mechanism that does not involve the desensitized state. To attempt to differentiate between these mechanisms, the rates of recovery were determined after exposure to peptide and/or agonist. The kinetics of recovery are consistent with stabilization of the desensitized state by substance P if the peptide remains bound long enough to allow rapid recovery to the low-affinity state. However, an allosteric modulation of agonist binding that does not involve the desensitized state cannot be ruled out.