M-current (I(M)) plays a key role in regulating neuronal excitability. Mutations in Kv7/KCNQ subunits, the molecular correlates of I(M), are associated with a familial human epilepsy syndrome. Kv7/KCNQ subunits are widely expressed, and I(M) has been recorded in somata of several types of neurons, but the subcellular distribution of M-channels remains elusive. By combining field-potential, whole-cell and intracellular recordings from area CA1 in rat hippocampal slices, and computational modelling, we provide evidence for functional M-channels in unmyelinated axons in the brain. Our data indicate that presynaptic M-channels can regulate axonal excitability and synaptic transmission, provided the axons are depolarized into the I(M) activation range (beyond approximately -65 mV). Here, such depolarization was achieved by increasing the extracellular K(+) concentration ([K(+)](o)). Extracellular recordings in the presence of moderately elevated [K(+)](o) (7-11 mm), showed that the specific M-channel blocker XE991 reduced the amplitude of the presynaptic fibre volley and the field EPSP in a [K(+)](o)-dependent manner, both in stratum radiatum and in stratum lacknosum moleculare. The M-channel opener, retigabine, had opposite effects. The higher the [K(+)](o), the greater the effects of XE991 and retigabine. Similar pharmacological modulation of EPSPs recorded intracellularly from CA1 pyramidal neurons, while blocking postsynaptic K(+) channels with intracellular Cs(+), confirmed that active M-channels are located presynaptically. Computational analysis with an axon model showed that presynaptic I(M) can control Na(+) channel inactivation and thereby affect the presynaptic action potential amplitude and Ca(2+) influx, provided the axonal membrane potential is sufficiently depolarized. Finally, we compared the effects of blocking I(M) on the spike after-depolarization and bursting in CA3 pyramidal neuron somata versus their axons. In standard [K(+)](o) (2.5 mm), XE991 increased the ADP and promoted burst firing at the soma, but not in the axons. However, I(M) contributed to the refractory period in the axons when spikes were broadened by a low dose 4-aminopyridine (200 microm). Our results indicate that functional Kv7/KCNQ/M-channels are present in unmyelinated axons in the brain, and that these channels may have contrasting effects on excitability depending on their subcellular localization.