Activation of native IH pacemaker channels and channels formed on heterologous expression of some isoforms of their pore forming HCN (hyperpolarization-activated, cyclic nucleotide-regulated) subunits is inhibited by the intravenous general anaesthetic propofol (2,6-diisopropylphenol). Here, we show that inhibition of homomeric HCN1 channels is mediated through anaesthetic association with the membrane embedded channel core, a domain that is highly conserved between this isoform and the relatively insensitive HCN2 and 4 subunits. Decoupling of HCN channel gating from cAMP and internal protons reveals that changes in these second messengers are neither necessary nor sufficient to account for propofol's actions. Modelling of the equilibrium and kinetic behaviour of HCN1 channels in the absence and presence of anaesthetic reveals that (1) gating is best described by models wherein closed and open states communicate via a voltage-independent reaction with no significant equilibrium occupancy of a deactivated open state at non-permissive voltages, and (2) propofol modifies gating by preferentially associating with closed-resting and closed-activated states but a low affinity interaction with the activated open state shapes the effect of the drug under physiological conditions. Our findings illuminate the mechanism of HCN channel gating and provide a framework that will facilitate development of propofol derivates that have altered pharmacological properties and therapeutic potentials.