In clinical studies and animal models, there is evidence that nicotine exposure during gestation can result in deficits in cognitive performance. The present study examined the effects of two doses of neonatal nicotine exposure on adult brain activity as assessed by the N1 and P3 components of the event-related potential (ERP) and background electroencephalography (EEG). Nicotine (0 mg, 1 mg/kg/day, 4 mg/kg/day) was administered to neonatal rat pups from postnatal day 4 (PN4) through PN12 with an artificial rearing paradigm; suckled rats served as additional control subjects. Nicotine exposure was specifically found to alter responses of the P3 component of the ERP, recorded in dorsal hippocampus, to changes in stimulus parameters. A significant reduction in the response of the P3A component to the noise tone as compared with the level of the frequently presented tone was found. A significant reduction in the response to the noise tone as compared with the level of the infrequently presented tone also was seen in the P3B component. No effects of drug exposure were found on the N1 component in any lead, although artificial rearing produced specific effects on the latency of the N1 component in cortex. No significant differences among treatment groups were found on any of the EEG-dependent variables. Female rats overall were found to have significantly higher EEG amplitudes than the males, a finding previously reported in our laboratory. However, no overall effects of gender were found on any ERP component. These studies suggest that neonatal nicotine exposure specifically reduces the electrophysiological response of the hippocampus to changes in auditory stimuli. Additional studies will be necessary to link these P3 amplitude changes to the effects of nicotine on the developing brain in human and animal subjects.