The restitution properties of cardiac action potential duration (APD) and conduction velocity (CV) are important factors in arrhythmogenesis. They determine alternans, wavebreak, and the patterns of reentrant arrhythmias. We developed a novel approach to characterize restitution using transfer functions. Transfer functions relate an input and an output quantity in terms of gain and phase shift in the complex frequency domain. We derived an analytical expression for the transfer function of interbeat intervals (IBIs) during conduction from one site (input) to another site downstream (output). Transfer functions can be efficiently obtained using a stochastic pacing protocol. Using simulations of conduction and extracellular mapping of strands of neonatal rat ventricular myocytes, we show that transfer functions permit the quantification of APD and CV restitution slopes when it is difficult to measure APD directly. We find that the normally positive CV restitution slope attenuates IBI variations. In contrast, a negative CV restitution slope (induced by decreasing extracellular [K(+)]) amplifies IBI variations with a maximum at the frequency of alternans. Hence, it potentiates alternans and renders conduction unstable, even in the absence of APD restitution. Thus, stochastic pacing and transfer function analysis represent a powerful strategy to evaluate restitution and the stability of conduction.