Hyperpolarization-activated cyclic nucleotide-gated (HCN) channels regulate pacemaker activity in some cardiac cells and neurons. In the present study, we have identified the presence of HCN channels in pancreatic beta-cells. We then examined the functional characterization of these channels in beta-cells via modulating HCN channel activity genetically and pharmacologically. Voltage-clamp experiments showed that over-expression of HCN2 in rat beta-cells significantly increased HCN current (I(h)), whereas expression of dominant-negative HCN2 (HCN2-AYA) completely suppressed endogenous I(h). Compared to control beta-cells, over-expression of I(h) increased insulin secretion at 2.8 mmol/l glucose. However, suppression of I(h) did not affect insulin secretion at both 2.8 and 11.1 mmol/l glucose. Current-clamp measurements revealed that HCN2 over-expression significantly reduced beta-cell membrane input resistance (R(in)), and resulted in a less-hyperpolarizing membrane response to the currents injected into the cell. Conversely, dominant negative HCN2-AYA expression led to a substantial increase of R(in), which was associated with a more hyperpolarizing membrane response to the currents injected. Remarkably, under low extracellular potassium conditions (2.5 mmol/l K(+)), suppression of I(h) resulted in increased membrane hyperpolarization and decreased insulin secretion. We conclude that I(h) in beta-cells possess the potential to modulate beta-cell membrane potential and insulin secretion under hypokalemic conditions.