The inwardly rectifying potassium channel Kir6.2 is the pore-forming subunit of the ATP-sensitive potassium (K(ATP)) channel, which controls insulin secretion by coupling glucose metabolism to membrane potential in beta-cells. Loss of channel function because of mutations in Kir6.2 or its associated regulatory subunit, sulfonylurea receptor 1, causes congenital hyperinsulinism (CHI), a neonatal disease characterized by persistent insulin secretion despite severe hypoglycemia. Here, we report a novel K(ATP) channel gating defect caused by CHI-associated Kir6.2 mutations at arginine 301 (to cysteine, glycine, histidine, or proline). These mutations in addition to reducing channel expression at the cell surface also cause rapid, spontaneous current decay, a gating defect we refer to as inactivation. Based on the crystal structures of Kir3.1 and KirBac1.1, Arg-301 interacts with several residues in the neighboring Kir6.2 subunit. Mutation of a subset of these residues also induces channel inactivation, suggesting that the disease mutations may cause inactivation by disrupting subunit-subunit interactions. To evaluate the effect of channel inactivation on beta-cell function, we expressed an alternative inactivation mutant R301A, which has equivalent surface expression efficiency as wild type channels, in the insulin-secreting cell line INS-1. Mutant expression resulted in more depolarized membrane potential and elevated insulin secretion at basal glucose concentration (3 mm) compared with cells expressing wild type channels, demonstrating that the inactivation gating defect itself is sufficient to cause loss of channel function and hyperinsulinism. Our studies suggest the importance of Kir6.2 subunit-subunit interactions in K(ATP) channel gating and function and reveal a novel gating defect underlying CHI.