Receptor-mediated modulation of ion channels generally involves G-proteins, phosphorylation, or both in combination. The sigma receptor, which modulates voltage-gated K+ channels, is a novel protein with no homology to other receptors known to modulate ion channels. In the present study patch clamp and photolabelling techniques were used to investigate the mechanism by which sigma receptors modulate K+ channels in peptidergic nerve terminals. The sigma receptor photoprobe iodoazidococaine labelled a protein with the same molecular mass (26 kDa) as the sigma receptor protein identified by cloning. The sigma receptor ligands pentazocine and SKF10047 modulated K+ channels, despite intra-terminal perfusion with GTP-free solutions, a G-protein inhibitor (GDPβS), a G-protein activator (GTPγS) or a non-hydrolysable ATP analogue (AMPPcP). Channels in excised outside-out patches were modulated by ligand, indicating that soluble cytoplasmic factors are not required. In contrast, channels within cell-attached patches were not modulated by ligand outside a patch, indicating that receptors and channels must be in close proximity for functional interactions. Channels expressed in oocytes without receptors were unresponsive to sigma receptor agonists, ruling out inhibition through a direct drug interaction with channels. These experiments indicate that sigma receptor-mediated signal transduction is membrane delimited, and requires neither G-protein activation nor protein phosphorylation. This novel transduction mechanism is mediated by membrane proteins in close proximity, possibly through direct interactions between the receptor and channel. This would allow for more rapid signal transduction than other ion channel modulation mechanisms, which in the present case of neurohypophysial nerve terminals would lead to the enhancement of neuropeptide release. Sigma receptors modulate the excitability of peptidergic nerve terminals in the neurohypophysis by inhibiting voltage-dependent K+ channels (IK) (Wilke et al. 1999a). The activation of sigma receptors by a variety of ligands reduces current flow through two distinct K+ channel types, the A-current channel (IA) and the Ca2+-activated K+ channel (IBK). Current is reduced by the same proportion over the entire accessible voltage range, with no shift in the voltage dependence of activation or inactivation. Furthermore, the residual unblocked currents inactivate with very similar rates, indicating that sigma receptor modulation entails a shutting down of function rather than a modification of gating behaviour (Wilke et al. 1998, 1999a,b). A comparison of the concentration dependence of IA reduction with that of IBK reduction indicated that the sigma receptor ligand PPHT inhibits both of these channels with a very similar EC50 (Wilke et al. 1998); similar results were obtained with haloperidol (Wilke et al. 1999a). Both IA and IK were reduced proportionally by a large number of sigma receptor ligands (including ditolylguanidine, SKF10047, pentazocine, haloperidol, PPHT, U101958, and apomorphine), suggesting that in the rat the same receptor is coupled to two types of K+ channels. In D2, D3 and D4 dopamine receptor-deficient mice, sigma receptor ligands reduced IK as effectively as in wild-type mice, indicating that the responses are not mediated by dopamine receptor subtypes known to interact with some sigma receptor ligands (Wilke et al. 1999a). Many candidate endogenous ligands were tested, including neuropeptides, catecholamines, and steroids, and none altered IK in this preparation. Furthermore, although the posterior pituitary contains κ-opioid receptors, which modulate Ca2+ channels (Rusin et al. 1997), K+ channels are not modulated by dynorphin in this preparation (authors’ unpublished observations), indicating that the reduction of IK by these ligands is not mediated by opioid receptors. The sigma receptor binding site was first described over two decades ago. Originally thought to be a novel opioid receptor (Martin et al. 1976), subsequent studies demonstrated that the sigma receptor binding site is a distinct pharmacological entity distinguished by unusually promiscuous binding properties (Su, 1993; de Costa & He, 1994). Recent molecular characterization has shown that the sigma receptor is a novel protein with a molecular mass of 26 kDa. Hydropathy analysis has indicated that this protein has a single putative membrane-spanning segment (Hanner et al. 1996; Kekuda et al. 1996; Seth et al. 1997). The deduced amino acid sequence of the sigma receptor has no homology with known mammalian proteins, but a weak homology with fungal sterol isomerase has led some investigators to speculate that sigma receptors may be involved in steroid hormone biosynthesis (Jbilo et al. 1997; Moebius et al. 1997). Sigma receptors are ubiquitously distributed in both brain and peripheral tissue. Their binding to many different kinds of drugs has made it difficult to determine their function, but sigma receptors have been implicated in a variety of functions, including motor control, psychosis, and a wide range of endocrine and immune processes (Su, 1993; Bowen, 1993). The unique molecular structure of the sigma receptor has raised intriguing questions about its mechanism of signal transduction. As novel proteins, sigma receptors fall outside the large families of membrane signalling molecules that have been identified in the past two decades. The sigma receptor does not have seven putative transmembrane domains, and so it would appear that this protein lacks the essential structural elements necessary for an interaction with G-proteins. At a topological level, the single putative transmembrane segment of the sigma receptor is reminiscent of many growth factor receptors with protein kinase activity, but at the sequence level no homology was found. There is some evidence that sigma receptor activation stimulates GTPase activity in mouse and rat brain (Itzhak, 1989; Tokuyama et al. 1997). GTP analogues have been reported to influence the binding of sigma receptor ligands (Beart et al. 1989), but a number of other binding studies led to different conclusions (Bowen, 1994). The modulation of IK by sigma receptor ligands was abolished by reagents that inactivate G-proteins in some studies (Nakazawa et al. 1995; Soriani et al. 1998, 1999), but in other studies G-protein perturbation had no effect (Morio et al. 1994; Wilke et al. 1999b). These questions and conflicting results prompted us to use patch clamp techniques to investigate the mechanism by which sigma receptors inhibit IK in nerve terminals of slices prepared from the posterior pituitary gland. Reagents known to block G-protein and phosphorylation-mediated signal transduction pathways failed to prevent IK modulation. Sigma receptor ligands modulated channel function in excised outside-out patches in the absence of soluble cytoplasmic factors. In contrast, channels within cell-attached patches could not be modulated by drug application to adjacent membrane outside the pipette tip. These results indicate that sigma receptors modulate membrane function by a novel membrane-delimited mechanism requiring close proximity between receptors and channels.