Key points Neuroinflammation associated with CNS insults leads to neuronal hyperexcitability, which may culminate in epileptiform discharges. Application of the endotoxin lipopolysaccharide (LPS) to brain tissue initiates a neuroinflammatory cascade, providing an experimental model to study the mechanisms of neuroinflammatory neuronal hyperexcitability. Here we show that LPS application to hippocampal slices markedly enhances the excitability of CA1 pyramidal cells by inhibiting a specific potassium current, the M‐current, generated by KV7/M channels, which controls the excitability of almost every neuron in the CNS. The LPS‐induced M‐current inhibition is triggered by sequential activation of microglia, astrocytes and pyramidal cells, mediated by metabotropic purinergic and glutamatergic transmission, leading to blockade of KV7/M channels by calcium released from intracellular stores. The identification of the downstream molecular target of neuroinflammation, namely the KV7/M channel, potentially has far reaching implications for the understanding and treatment of many acute and chronic brain disorders. Abstract Acute brain insults and many chronic brain diseases manifest an innate inflammatory response. The hallmark of this response is glia activation, which promotes repair of damaged tissue, but also induces structural and functional changes that may lead to an increase in neuronal excitability. We have investigated the mechanisms involved in the modulation of neuronal activity by acute inflammation. Initiating inflammatory responses in hippocampal tissue rapidly led to neuronal depolarization and repetitive firing even in the absence of active synaptic transmission. This action was mediated by a complex metabotropic purinergic and glutamatergic glia‐to‐neuron signalling cascade, leading to the blockade of neuronal KV7/M channels by Ca2+ released from internal stores. These channels generate the low voltage‐activating, non‐inactivating M‐type K+ current (M‐current) that controls intrinsic neuronal excitability, and its inhibition was the predominant cause of the inflammation‐induced hyperexcitability. Our discovery that the ubiquitous KV7/M channels are the downstream target of the inflammation‐induced cascade, has far reaching implications for the understanding and treatment of many acute and chronic brain disorders.