Although serotonergic innervation of sensory brain areas is ubiquitous, its effects on sensory information processing remain poorly understood. We investigated these effects in pyramidal neurons within the electrosensory lateral line lobe (ELL) of weakly electric fish. Surprisingly, we found that 5-HT is present at different levels across the different ELL maps; the presence of 5-HT fibers was highest in the map that processes intraspecies communication signals. Electrophysiological recordings revealed that 5-HT increased excitability and burst firing through a decreased medium afterhyperpolarization resulting from reduced small-conductance calcium-activated (SK) currents as well as currents mediated by an M-type potassium channel. We next investigated how 5-HT alters responses to sensory input. 5-HT application decreased the rheobase current, increased the gain, and decreased first spike latency. Moreover, it reduced discriminability between different stimuli, as quantified by the mutual information rate. We hypothesized that 5-HT shifts pyramidal neurons into a burst-firing mode where bursts, when considered as events, can detect the presence of particular stimulus features. We verified this hypothesis using signal detection theory. Our results indeed show that serotonin-induced bursts of action potentials, when considered as events, could detect specific stimulus features that were distinct from those detected by isolated spikes. Moreover, we show the novel result that isolated spikes transmit more information after 5-HT application. Our results suggest a novel function for 5-HT in that it enables differential processing by action potential patterns in response to current injection.