The axon initial segment (AIS) serves as the site of action potential initiation in most neurons, but difficulties in isolating the effects of voltage-gated ion channels in the AIS from those of the soma and dendrites have hampered understanding how AIS properties influence neural coding. Here we have combined confocal microscopy, patch-clamp recordings and light-sensitive channel blockers ('photoswitches') in binaural auditory gerbil neurons to show that hyperpolarization and cyclic-nucleotide-gated (HCN) channels are expressed in the AIS and decrease spike probability, in a manner distinct from that of HCN channels in the soma and dendrites. Furthermore, the control of spike threshold by HCN channels in the AIS can be altered through serotonergic modulation of 5-hydroxytryptamine 1A (5-HT1A) receptors, which hyperpolarizes the activation range of HCN channels. As release of serotonin signals changes in motivation and attention states, axonal HCN channels provide a mechanism to translate these signals into changes in the threshold for sensory stimuli.