The small-conductance calcium-activated K+ channel SK3 (SKCa3/KCNN3) regulates electrical excitability and neurotransmitter release in monoaminergic neurons, and has been implicated in schizophrenia, ataxia and anorexia nervosa. We have identified a novel SK3 transcript, SK3-1B that utilizes an alternative first exon (exon 1B), but is otherwise identical to SK3. SK3-1B, mRNA is widely distributed in human tissues and is present at 20-60% of SK3 in the brain. The SK3-1B protein lacks the N-terminus and first transmembrane segment, and begins eight residues upstream of the second transmembrane segment. When expressed alone, SK3-1B did not produce functional channels, but selectively suppressed endogenous SK3 currents in the pheochromocytoma cell line, PC12, in a dominant-negative fashion. This dominant inhibitory effect extended to other members of the SK subfamily, but not to voltage-gated K+ channels, and appears to be due to intracellular trapping of endogenous SK channels. The effect of SK3-1B expression is very similar to that produced by expression of the rare SK3 truncation allele, SK3-Δ, found in a patient with schizophrenia. Regulation of SK3 and SK3-1B levels may provide a potent mechanism to titrate neuronal firing rates and neurotransmitter release in monoaminergic neurons, and alterations in the relative abundance of these proteins could contribute to abnormal neuronal excitability, and to the pathogenesis of schizophrenia.