The hyperpolarization-activated cation current, termed Ih or If, is widely expressed in heart cells and neurons. The current is best known for its prime role in the generation of rhythmic activity in cardiac and neuronal pacemaker cells. Ih is also present in many non-pacing neurons where it controls excitability and other electrical properties. The HCN channel family comprises four members (HCN1-4). The specific functions of HCN1, HCN2 and HCN4 have been extensively investigated in the past. By contrast, almost nothing is known about the physiological roles of HCN3. In this study, we addressed this important issue. Using heterologous expression systems, we have determined the basic electrophysiological properties of HCN3. HCN3 shares some principal features with other HCN channel isoforms but is set apart from these channels by its very slow deactivation kinetics and the lack of cAMP sensitivity. To elucidiate the physiological significance of HCN3 we have generated HCN3-deficient mice. The knockout mice were fertile and showed no immediately visible physical abnormalities. Closer inspection of the mice revealed alterations of the electroencephalogram as well as specific behavioural defects. The neuronal phenotype was accompanied by a specific impairment of heart function which will be described in more detail. At basal heart rate, mice deficient for HCN3 displayed a profound increase in the T-wave amplitude of the electrocardiogram. Action potential measurements indicated that this effect was caused by an acceleration of the late repolarization phase in epicardial myocytes. In agreement with a specific role in cardiomyocytes HCN3 was detected in ventricle while it was absent from sinoatrial node tissue. Cardiomyocytes of HCN3-deficient mice displayed an about 30% reduction of total Ih. At physiological ionic conditions the HCN3-mediated current had a reversal potential of about -35 mV and displayed ultra-slow deactivation kinetics. We propose that HCN3 confers a depolarizing background current that counteracts the action of hyperpolarizing potassium currents in late repolarization. Thus, HCN3 contributes to the ventricular action potential waveform in murine heart. In conclusion, our data indicate that HCN3 displays unique properties and is involved in the control of both neuronal and cardiac functions.