Two characteristic features of the rapid component of the cardiac delayed rectifier current (I_Kr) are prominent inward rectification and an unexpected reduction in activating current with decreased [K⁺]_o. Similar features are observed with heterologous expression of HERG, the gene thought to encode the channel carrying I_Kr; moreover, recent studies indicate that the mechanism underlying rectification of HERG current is the inactivation that channels rapidly undergo during depolarizing pulses. The present studies were designed to determine the mechanism of I_Kr rectification and [K⁺]_o sensitivity in the mouse atrial myocyte cell line, AT-1 cells. Reducing [Mg²⁺]_i to 0, which reverses inward rectification of some K⁺ channels, did not alter I_Kr current-voltage relationships, although it did decrease sensitivity to the I_Kr blockers dofetilide and quinidine 2- to 5-fold. To determine the presence and extent of fast inactivation of I_Kr in AT-1 cells, a brief hyperpolarizing pulse (20 ms to −120 mV) was applied during long depolarizations. Immediately after this pulse, a very large outward current that decayed rapidly to the previous activating current baseline was observed. This outward current component was blocked by the I_Kr-specific inhibitor dofetilide, indicating that it represented recovery from fast inactivation during the hyperpolarizing step, with fast reinactivation during the return to depolarized potential. With removal of inactivation using this approach, current-voltage relationships for I_Kr ([K⁺]_o, 1 to 20 mmol/L) were linear and reversed close to the predicted Nernst potential for K⁺. In addition, decreased [K⁺]_o decreased the time constants for open→inactivated and inactivated→open transitions. Thus, in these cardiac myocytes, as with heterologously expressed HERG, I_Kr undergoes fast inactivation that determines its characteristic inward rectification. These studies demonstrate that the mechanism underlying decreased activating current observed at low [K⁺]_o is more extensive fast inactivation.