Sleep is a whole-organism phenomenon accompanied by global changes in neural activity. We previously identified SLEEPLESS (SSS) as a glycosylphosphatidyl inositol-anchored protein required for sleep in Drosophila. Here we found that SSS is critical for regulating the sleep-modulating potassium channel Shaker. SSS and Shaker shared similar expression patterns in the brain and specifically affected each other's expression levels. sleepless (sss) loss-of-function mutants exhibited altered Shaker localization, reduced Shaker current density and slower Shaker current kinetics. Transgenic expression of sss in sss mutants rescued defects in Shaker expression and activity cell-autonomously and suggested that SSS functions in wake-promoting, cholinergic neurons. In heterologous cells, SSS accelerated the kinetics of Shaker currents and was co-immunoprecipitated with Shaker, suggesting that SSS modulates Shaker activity via a direct interaction. SSS is predicted to belong to the Ly-6/neurotoxin superfamily, suggesting a mechanism for regulation of neuronal excitability by endogenous toxin-like molecules.