Blood flow into the brain is dynamically regulated to satisfy the changing metabolic requirements of neurons, but how this is accomplished has remained unclear. Here we demonstrate a central role for capillary endothelial cells in sensing neural activity and communicating it to upstream arterioles in the form of an electrical vasodilatory signal. We further demonstrate that this signal is initiated by extracellular K -a byproduct of neural activity-which activates capillary endothelial cell inward-rectifier K (K 2.1) channels to produce a rapidly propagating retrograde hyperpolarization that causes upstream arteriolar dilation, increasing blood flow into the capillary bed. Our results establish brain capillaries as an active sensory web that converts changes in external K into rapid, 'inside-out' electrical signaling to direct blood flow to active brain regions.