Ethanol stimulates the firing activity of midbrain dopamine (DA) neurons, leading to enhanced dopaminergic transmission in the mesolimbic system. This effect is thought to underlie the behavioral reinforcement of alcohol intake. Ethanol has been shown to directly enhance the intrinsic pacemaker activity of DA neurons, yet the cellular mechanism mediating this excitation remains poorly understood. The hyperpolarization-activated cation current, Ih, is known to contribute to the pacemaker firing of DA neurons. To determine the role of Ih in ethanol excitation of DA neurons, we performed patch-clamp recordings in acutely prepared mouse midbrain slices. Superfusion of ethanol increased the spontaneous firing frequency of DA neurons in a reversible fashion. Treatment with ZD7288, a blocker of Ih, irreversibly depressed basal firing frequency and significantly attenuated the stimulatory effect of ethanol on firing. Furthermore, ethanol reversibly augmented Ih amplitude and accelerated its activation kinetics. This effect of ethanol was accompanied by a shift in the voltage dependence of Ih activation to more depolarized potentials and an increase in the maximum Ih conductance. Cyclic AMP mediated the depolarizing shift in Ih activation but not the increase in the maximum conductance. Finally, repeated ethanol treatment in vivo induced downregulation of Ih density in DA neurons and an accompanying reduction in the magnitude of ethanol stimulation of firing. These results suggest an important role of Ih in the reinforcing actions of ethanol and in the neuroadaptations underlying escalation of alcohol consumption associated with alcoholism.