Cognitive deficits represent a core symptom cluster in schizophrenia that are thought to reflect developmental dysregulations within a neural system involving the ventral hippocampus (VH), nucleus accumbens (NAC), and prefrontal cortex (PFC). The present experiments determined the cognitive effects of transiently inactivating VH in rats during a sensitive period of development. Neonatal (postnatal day 7, PD7) and adolescent (PD32) male rats received a single bilateral infusion of saline or tetrodotoxin (TTX) within the VH to transiently inactivate local circuitry and efferent outflow. Rats were tested as adults on an attentional set-shifting task. Performance in this task depends upon the integrity of the PFC and NAC. TTX infusions did not affect the initial acquisition or ability to learn an intra-dimensional shift. However, TTX rats required a greater number of trials than did controls to acquire the first reversal and extra-dimensional shift (ED) stages. These impairments were age and region-specific as rats infused with TTX into the VH at PD32, or into the dorsal hippocampus at PD7, exhibited performance in the task similar to that of controls. Finally, acute systemic administration of the partial α7 nicotinic acetylcholine receptor (nAChR) agonist SSR 180711 (3.0 mg/kg) eliminated the TTX-induced performance deficits. Given that patients with schizophrenia exhibit hippocampal pathophysiology and deficits in the ED stages of set-shifting tasks, our results support the significance of transient hippocampal inactivation as an animal model for studying the cognitive impairments in schizophrenia as well as the pro-cognitive therapeutic potential of α7 nAChR agonists.