A novel calcium-dependent potassium current (K_slow) that slowly activates in response to a simulated islet burst was identified recently in mouse pancreatic β-cells (Göpel, S.O., T. Kanno, S. Barg, L. Eliasson, J. Galvanovskis, E. Renström, and P. Rorsman. 1999. J. Gen. Physiol. 114:759–769). K_slow activation may help terminate the cyclic bursts of Ca²⁺-dependent action potentials that drive Ca²⁺ influx and insulin secretion in β-cells. Here, we report that when [Ca²⁺]_i handling was disrupted by blocking Ca²⁺ uptake into the ER with two separate agents reported to block the sarco/endoplasmic calcium ATPase (SERCA), thapsigargin (1–5 μM) or insulin (200 nM), K_slow was transiently potentiated and then inhibited. K_slow amplitude could also be inhibited by increasing extracellular glucose concentration from 5 to 10 mM. The biphasic modulation of K_slow by SERCA blockers could not be explained by a minimal mathematical model in which [Ca²⁺]_i is divided between two compartments, the cytosol and the ER, and K_slow activation mirrors changes in cytosolic calcium induced by the burst protocol. However, the experimental findings were reproduced by a model in which K_slow activation is mediated by a localized pool of [Ca²⁺] in a subspace located between the ER and the plasma membrane. In this model, the subspace [Ca²⁺] follows changes in cytosolic [Ca²⁺] but with a gradient that reflects Ca²⁺ efflux from the ER. Slow modulation of this gradient as the ER empties and fills may enhance the role of K_slow and [Ca²⁺] handling in influencing β-cell electrical activity and insulin secretion.