The Ca(2+)-binding proteins KChIP1-4 (KChIP3 is also known as DREAM and calsenilin) act as auxiliary subunits for voltage-gated K(+) channels in the Kv4 family. Here we identify three splicing isoforms of rat KChIP2 with variable N-terminal peptides. The two longer isoforms, which contain the 32-amino acid peptide, produce larger increases in Kv4.3 protein level and current density and more effectively localize themselves and their associated channels at the plasma membrane than the shortest variant. The 32-amino acid peptide contains potential palmitoylation cysteines. Metabolic labeling demonstrates that these cysteines in the KChIP2 isoforms, as well as the corresponding sites in KChIP3, are palmitoylated. Mutating these cysteines reduces their plasma membrane localization and the enhancement of Kv4.3 current density. Thus, palmitoylation of the KChIP auxiliary subunits controls plasma membrane localization of their associated channels.