Ethanol modifies neural activity in the brain by modulating ion channels. Ethanol activates G protein-gated inwardly rectifying K(+) channels, but the molecular mechanism is not well understood. Here, we used a crystal structure of a mouse inward rectifier containing a bound alcohol and structure-based mutagenesis to probe a putative alcohol-binding pocket located in the cytoplasmic domains of GIRK channels. Substitutions with bulkier side-chains in the alcohol-binding pocket reduced or eliminated activation by alcohols. By contrast, alcohols inhibited constitutively open channels, such as IRK1 or GIRK2 engineered to strongly bind PIP(2). Mutations in the hydrophobic alcohol-binding pocket of these channels had no effect on alcohol-dependent inhibition, suggesting an alternate site is involved in inhibition. Comparison of high-resolution structures of inwardly rectifying K(+) channels suggests a model for activation of GIRK channels using this hydrophobic alcohol-binding pocket. These results provide a tool for developing therapeutic compounds that could mitigate the effects of alcohol.