KCNQ2 (Kv7.2) and KCNQ3 (Kv7.3) K þ channels dampen neuronal excitability and their functional impairment may lead to epilepsy. Less is known about KCNQ5 (Kv7.5), which also displays wide expression in the brain. Here we show an unexpected role of KCNQ5 in dampening synaptic inhibition and shaping network synchronization in the hippocampus. KCNQ5 localizes to the postsynaptic site of inhibitory synapses on pyramidal cells and in interneurons. Kcnq5 dn/dn mice lacking functional KCNQ5 channels display increased excitability of different classes of interneurons, enhanced phasic and tonic inhibition, and decreased electrical shunting of inhibitory postsynaptic currents. In vivo, loss of KCNQ5 function leads to reduced fast (gamma and ripple) hippocampal oscillations, altered gamma-rhythmic discharge of pyramidal cells and impaired spatial representations. Our work demonstrates that KCNQ5 controls excitability and function of hippocampal networks through modulation of synaptic inhibition.