Kv7.1 (KCNQ1) channels are regulators of several physiological processes including vasodilatation, repolarization of cardiomyocytes, and control of secretory processes. A number of Kv7.1 pore mutants are sensitive to extracellular potassium. We hypothesized that extracellular potassium also modulates wild-type Kv7.1 channels. The Kv7.1 currents were measured in Xenopus laevis oocytes at different concentrations of extracellular potassium (1-50 mM). As extracellular potassium was elevated, Kv7.1 currents were reduced significantly more than expected from theoretical calculations based on the Goldman-Hodgkin-Katz flux equation. Potassium inhibited the steady-state current with an IC(50) of 6.0 ± 0.2 mM. Analysis of tail-currents showed that potassium increased the fraction of channels in the inactivated state. Similarly, the recovery from inactivation was slowed by potassium, suggesting that extracellular potassium stabilizes an inactivated state in Kv7.1 channels. The effect of extracellular potassium was absent in noninactivating Kv7.1/KCNE1 and Kv7.1/KCNE3 channels, further supporting a stabilized inactivated state as the underlying mechanism. Interestingly, coexpression of Kv7.1 with KCNE2 did not attenuate the inhibition by potassium. In a number of other Kv channels, including Kv1.5, Kv4.3, and Kv7.2-5 channels, currents were only minimally reduced by an increase in extracellular potassium as expected. These results show that extracellular potassium modulates Kv7.1 channels and suggests that physiological changes in potassium concentrations may directly control the function of Kv7.1 channels. This may represent a novel regulatory mechanism of excitability and of potassium transport in tissues expressing Kv7.1 channels.