Disruption of sodium (Na+) channels at the nodes of Ranvier and increased lateral expression in internodes are major hallmarks of myelin loss, causing impairment of action potential (AP) conduction and predisposing axons to injury. While most previous studies on demyelination focused on white matter fibre tracts (e.g. optic nerve and corpus callosum), the impact of demyelination on the ion channel composition of axons in the grey matter and the axon initial segment (AIS), the primary site for AP initiation, remain elusive. Here, we used the well-established cuprizone toxin mouse model for grey matter demyelination (Matsushima & Morell 2001). Six weeks old male mice (C57BL/6, cuprizone n = 124, control n = 79) were put on 0.2% or 0.3% cuprizone mixed with powder food for 5 or 9 weeks, respectively. The weight loss of cuprizone-fed mice was closely monitored and ranged between 20 – 25%. After treatment mice were decapitated under deep isoflurane anaesthesia (3% v/v) and 300 µm parasagittal brain slices were made according to routine methods. Immuno-labelling of myelin basic protein (MBP) in the somatosensory cortex revealed that myelin loss was most prominent in the layers 5 and 6. In vitro somatic current-clamp whole-cell recordings from visually identified thick-tufted layer 5 neurons showed a significant ~3-fold increase in spontaneously active cells (30%, n = 53 of 179) compared to control animals (11%, n = 5 of 46; Chi-square analysis P = 0.004). These spontaneous depolarisations were driven by increased network excitability, the appearance of ectopic APs (n = 27 of 179) and a large number of high-frequency burst firing neurons (41%, Chi-square analysis P = 0.0001). Myelin loss was furthermore associated with a shift of the AIS domain to more proximal locations near the soma (2.45 ± 0.1 µm, n = 40; Control 4.5 ± 0.5 µm, n = 14; Student’s t-test P = 0.001) and accompanied by diffuse lateral expression of Na+ channels (Nav1.6) around branch points of identified layer 5 axons (3.84 ± 0.3 µm, n = 24; Control 2.5 ± 0.1 µm, n = 13; Student’s t-test P = 0.0002). This study reveals for the first time that demyelination of grey matter circuits affects the intrinsic neuronal excitability and induces spontaneous aberrant network excitation, which may significantly deteriorate the spatio-temporal structure of information encoding, providing possibly new insights into the cognitive impairment in multiple sclerosis.