β-secretase 1 (β-site amyloid precursor protein (APP)-cleaving enzyme 1, BACE1) plays a crucial role in the amyloidogenesis of Alzheimer′s Disease (AD). BACE1 was also discovered to act like an auxiliary subunit to modulate neuronal KCNQ2/3 channels independent of its proteolytic function. BACE1 is palmitoylated at its carboxyl-terminal region, which brings BACE1 to ordered, cholesterol-rich membrane microdomains (rafts). However, the physiological consequences of this specific localization of BACE1 remain elusive. Using spectral Förster Resonance Energy Transfer (FRET), we confirmed BACE1 and KCNQ2/3 channels formed a signaling complex, a phenomenon that was relatively unaffected by the palmitoylation of BACE1. Nevertheless, palmitoylation of BACE1 was required for the recruitment of KCNQ2/3 channels to lipid-raft domains. Mutating the four carboxyl-terminal cysteines (4C/A) of BACE1 abolished the BACE1-dependent increase of FRET between KCNQ2/3 and a lipid raft-specific protein Caveolin1. Furthermore, we used two fluorescent probes, named L10 and S15, to label lipid rafts and non-raft domains of the plasma membrane respectively. Coexpressing BACE1 substantially elevated the FRET between L10 and KCNQ2/3 whereas BACE1-4C/A failed to produce this effect. In contrast, BACE1 had no significant effect on the FRET between S15 probes and KCNQ2/3 channels. In addition, the reduction of BACE1-dependent FRET between raft-targeting L10 probes and KCNQ2/3 channels by applying cholesterol-extracting reagent methyl-β-cyclodextrin (β-CD), raft-disrupting general anesthetics, and pharmacological inhibitors of palmitoylation all supported our hypothesis of the palmitoylation-dependent and raft-specific localization of KCNQ2/3 channels. Collectively, we provide a mechanism underlying how the localization of a neuronal potassium channel is controlled by AD-related protein BACE1.