Expression of KCNQ2/3 (Kv7.2 and 7.3) heteromers underlies the neuronal M-current, a current that is suppressed by activation of a variety of receptors that couple to the hydrolysis of PIP2. Expression of Kv7.2/7.3 channels in HEK293 cells produced a non-inactivating potassium current characteristic of M-current. Muscarinic receptors endogenous to HEK293 cells were identified as being m3 by pharmacology and Western blotting, producing a rise of intracellular calcium ([Ca(2+)]i) upon activation. Activation of these endogenous muscarinic receptors however, failed to suppress expressed Kv7.2/7.3 current. Current suppression was reconstituted by co-expression of HA-tagged muscarinic m1 or m3 receptors. Examination of membrane fractions showed that both expressed receptors and Kv7.2 and 7.3 channel subunits resided within lipid rafts. Disruption of lipid rafts by pre-treatment of cells expressing either m1 or m3 muscarinic receptors with methyl-beta-cyclodextrin produced a loss of localization of proteins within lipid raft membrane fractions. This pre-treatment also abolished both the increase of [Ca(2+)]i and suppression of expressed Kv7.2/7.3 current evoked by activation of expressed m1 or m3 muscarinic receptors. A similar loss of muscarinic receptor-mediated suppression of M-current native to rat dorsal root ganglion neurons was observed after incubating dissociated cells with methyl-beta-cyclodextrin. These data suggest that lipid rafts co-localized both muscarinic receptors and channel subunits to enable receptor-mediated suppression of channel activity, a spatial co-localization that enables specificity of coupling between receptor and ion channel.