Nicotine and alcohol are two of the most commonly abused legal substances. Heavy use of one drug can often lead to, or is predictive of, heavy use of the other drug in adolescents and adults. Heavy drinking and smoking alone are of significant health hazard. The combination of the two, however, can result in synergistic adverse effects particularly in incidences of various cancers (e.g., esophagus). Although detrimental consequences of smoking are well established, nicotine by itself might possess positive and even therapeutic potential. Similarly, alcohol at low or moderated doses may confer beneficial health effects. These opposing findings have generated considerable interest in how these drugs act. Here we will briefly review the negative impact of drinking-smoking co-morbidity followed by factors that appear to contribute to the high rate of co-use of alcohol and nicotine. Our main focus will be on what research is telling us about the central actions and interactions of these drugs, and what has been elucidated about the mechanisms of their positive and negative effects. We will conclude by making suggestions for future research in this area.