To signal properly, excitable cells must establish and maintain the correct balance of various types of ion channels that increase or decrease membrane excitability. The mechanisms by which this balance is regulated remain largely unknown. Here, we describe a regulatory mechanism uncovered by a Drosophila behavioral mutant, down and out (dao). At elevated temperatures, dao loss-of-function mutants exhibit seizures associated with spontaneous bursts of neural activity. This phenotype closely resembles that of seizure mutations, which impair activity of ether-a-go-go-related gene (Erg)-type potassium channels. Conversely, neural over-expression of wild-type Dao confers dominant temperature-sensitive paralysis with kinetics reminiscent of paralytic sodium-channel mutants. The over-expression phenotype of dao is suppressed in a seizure mutant background, suggesting that Dao acts by an effect on Erg channels. In support of this hypothesis, functional expression of Erg channels in a heterologous system is dependent on the presence of Dao. These results indicate that Dao has an important role in establishing the proper level of neuronal membrane excitability by regulating functional expression of Erg channels.