HCN1-4 subunits form Na+/K+-permeable ion channels that are activated by hyperpolarization and carry the current known as I(h). I(h) has been characterized in vestibular hair cells of the inner ear, but its molecular correlates and functional contributions have not been elucidated. We examined Hcn mRNA expression and immunolocalization of HCN protein in the mouse utricle, a mechanosensitive organ that contributes to the sense of balance. We found that HCN1 is the most highly expressed subunit, localized to the basolateral membranes of type I and type II hair cells. We characterized I(h) using the whole-cell, voltage-clamp technique and found the current expressed in 84% of the cells with a mean maximum conductance of 4.4 nS. I(h) was inhibited by ZD7288, cilobradine, and by adenoviral expression of a dominant-negative form of HCN2. To determine which HCN subunits carried I(h), we examined hair cells from mice deficient in Hcn1, 2, or both. I(h) was completely abolished in hair cells of Hcn1⁻/⁻ mice and Hcn1/2⁻/⁻ mice but was similar to wild-type in Hcn2⁻/⁻ mice. To examine the functional contributions of I(h), we recorded hair cell membrane responses to small hyperpolarizing current steps and found that activation of I(h) evoked a 5-10 mV sag depolarization and a subsequent 15-20 mV rebound upon termination. The sag and rebound were nearly abolished in Hcn1-deficient hair cells. We also found that Hcn1-deficient mice had deficits in vestibular-evoked potentials and balance assays. We conclude that HCN1 contributes to vestibular hair cell function and the sense of balance.