In contrast to most voltage-gated ion channels, hyperpolarization- and cAMP gated (HCN) ion channels open on hyperpolarization. Structure-function studies show that the voltage-sensor of HCN channels are unique but the mechanisms that determine gating polarity remain poorly understood. All-atom molecular dynamics simulations (~20 μs) of HCN1 channel under hyperpolarization reveals an initial downward movement of the S4 voltage-sensor but following the transfer of last gating charge, the S4 breaks into two sub-helices with the lower sub-helix becoming parallel to the membrane. Functional studies on bipolar channels show that the gating polarity strongly correlates with helical turn propensity of the substituents at the breakpoint. Remarkably, in a proto-HCN background, the replacement of breakpoint serine with a bulky hydrophobic amino acid is sufficient to completely flip the gating polarity from inward to outward-rectifying. Our studies reveal an unexpected mechanism of inward rectification involving a linker sub-helix emerging from HCN S4 during hyperpolarization.