Inactivation of voltage-gated Kv1 channels can be altered by Kvbeta subunits, which block the ion-conducting pore to induce a rapid ('N-type') inactivation. Here, we investigate the mechanisms and structural basis of Kvbeta1.3 interaction with the pore domain of Kv1.5 channels. Inactivation induced by Kvbeta1.3 was antagonized by intracellular PIP(2). Mutations of R5 or T6 in Kvbeta1.3 enhanced Kv1.5 inactivation and markedly reduced the effects of PIP(2). R5C or T6C Kvbeta1.3 also exhibited diminished binding of PIP(2) compared with wild-type channels in an in vitro lipid-binding assay. Further, scanning mutagenesis of the N terminus of Kvbeta1.3 revealed that mutations of L2 and A3 eliminated N-type inactivation. Double-mutant cycle analysis indicates that R5 interacts with A501 and T480 of Kv1.5, residues located deep within the pore of the channel. These interactions indicate that Kvbeta1.3, in contrast to Kvbeta1.1, assumes a hairpin structure to inactivate Kv1 channels. Taken together, our findings indicate that inactivation of Kv1.5 is mediated by an equilibrium binding of the N terminus of Kvbeta1.3 between phosphoinositides (PIPs) and the inner pore region of the channel.