Hyperpolarization activated cyclic nucleotide (HCN) gated channels conduct a current, I(h); how I(h) influences excitability and spike firing depends primarily on channel distribution in subcellular compartments. For example, dendritic expression of HCN1 normalizes somatic voltage responses and spike output in hippocampal and cortical neurons. We reported previously that HCN2 is predominantly expressed in dendritic spines in reticular thalamic nucleus (RTN) neurons, but the functional impact of such nonsomatic HCN2 expression remains unknown. We examined the role of HCN2 expression in regulating RTN excitability and GABAergic output from RTN to thalamocortical relay neurons using wild-type and HCN2 knock-out mice. Pharmacological blockade of I(h) significantly increased spike firing in RTN neurons and large spontaneous IPSC frequency in relay neurons; conversely, pharmacological enhancement of HCN channel function decreased spontaneous IPSC frequency. HCN2 deletion abolished I(h) in RTN neurons and significantly decreased sensitivity to 8-bromo-cAMP and lamotrigine. Recapitulating the effects of I(h) block, HCN2 deletion increased both temporal summation of EPSPs in RTN neurons as well as GABAergic output to postsynaptic relay neurons. The enhanced excitability of RTN neurons after I(h) block required activation of ionotropic glutamate receptors; consistent with this was the colocalization of HCN2 and glutamate receptor 4 subunit immunoreactivities in dendritic spines of RTN neurons. The results indicate that, in mouse RTN neurons, HCN2 is the primary functional isoform underlying I(h) and expression of HCN2 constrains excitatory synaptic integration.