Cyclic nucleotides directly enhance the opening of the tetrameric CNG and HCN channels, although the mechanism remains unclear. We examined why HCN and certain CNG subunits form functional homomeric channels, whereas other CNG subunits only function in heteromeric channels. The "defect" in the CNGA4 subunit that prevents its homomeric expression was localized to its C-linker, which connects the transmembrane domain to the binding domain and contains a tripeptide that decreases the efficacy of ligand gating. Remarkably, replacement of the homologous HCN tripeptide with the CNGA4 sequence transformed cAMP into an inverse agonist that inhibits HCN channel opening. Using analytical ultracentrifugation, we identified the structural basis for this gating switch: whereas cAMP normally enhances the assembly of HCN C-terminal domains into a tetrameric gating ring, inclusion of the CNGA4 tripeptide reversed this action so that cAMP now causes gating ring disassembly. Thus, ligand gating depends on the dynamic oligomerization of C-terminal binding domains.