The physiological function of ion channels is affected by protein-protein and protein-membrane interactions that modulate their activity and/or localization. Palmitoylation modulates protein function by facilitating targeted membrane association, interaction with other proteins, and determining subcellular localization. In this study, we demonstrate that the voltage-gated potassium channel Kv1.5 is palmitoylated and that mutation of C-terminal cysteines is sufficient to abolish palmitoylation of the Kv1.5 polypeptide in Chinese hamster ovary (CHO) cells. The labeling represented thioester linkage of the labeled palmitic acid to cysteine rather than amide and oxygen ester linkages as judged by release of the palmitic acid upon treatment of the gel with hydroxylamine at neutral pH. Site-directed mutagenesis and radiolabeling studies revealed that C593 was the sole site of palmitoylation. Elucidation of the biological function of palmitoylation revealed that expression of the palmitoylation-deficient mutant (FL-Kv1.5^Palm-) in stable CHO cells increased membrane expression as determined by biotinylation of surface proteins and quantitative immunofluorescence analyses of these cells, in turn enhancing outward potassium current. This enhanced surface expression and currents were consequential to the slower rate of internalization, causing an increased localization of FL-Kv1.5^Palm- in the plasma membrane as compared with the wild-type FL-Kv1.5 channels. We conclude that the Kv1.5 channel is palmitoylated and that its palmitoylation modulates its biological functions and therefore might provide a physiological link between metabolic state and expression of Kv1.5 on the plasma membrane.