This study reports the identification of an endogenous inhibitor of the G protein–gated (K_ACh) channel and its effect on the K_ACh channel kinetics. In the presence of acetylcholine in the pipette, K_ACh channels in inside-out atrial patches were activated by applying GTP to the cytoplasmic side of the membrane. In these patches, addition of physiological concentration of intracellular ATP (4 mM) upregulated K_ACh channel activity approximately fivefold and induced long-lived openings. However, such ATP-dependent gating is normally not observed in cell-attached patches, indicating that an endogenous substance that inhibits the ATP effect is present in the cell. We searched for such an inhibitor in the cell. ATP-dependent gating of the K_ACh channel was inhibited by the addition of the cytosolic fraction of rat atrial or brain tissues. The lipid component of the cytosolic fraction was found to contain the inhibitory activity. To identify the lipid inhibitor, we tested the effect of ∼40 different lipid molecules. Among the lipids tested, only unsaturated free fatty acids such as oleic, linoleic, and arachidonic acids (0.2–2 μM) reversibly inhibited the ATP-dependent gating of native K_ACh channels in atrial cells and hippocampal neurons, and of recombinant K_ACh channels (GIRK1/4 and GIRK1/2) expressed in oocytes. Unsaturated free fatty acids also inhibited phosphatidylinositol-4,5-bisphosphate (PIP₂)-induced changes in K_ACh channel kinetics but were ineffective against ATP-activated background K₁ channels and PIP₂-activated K_ATP channels. These results show that during agonist-induced activation, unsaturated free fatty acids in the cytoplasm help to keep the cardiac and neuronal K_ACh channels downregulated by antagonizing their ATP-dependent gating. The opposing effects of ATP and free fatty acids represent a novel regulatory mechanism for the G protein–gated K⁺ channel.