Neuropathic pain is a severe health problem for which there is a lack of effective therapy. A frequent underlying condition of neuropathic pain is a sustained overexcitability of pain-sensing (nociceptive) sensory fibres. Therefore, the identification of mechanisms for such abnormal neuronal excitability is of utmost importance for understanding neuropathic pain. Despite much effort, an inclusive model explaining peripheral overexcitability is missing. We investigated transcriptional regulation of the Kcnq2 gene, which encodes the Kv7.2 subunit of membrane potential-stabilizing M channel, in peripheral sensory neurons in a model of neuropathic pain—partial sciatic nerve ligation (PSNL). We show that Kcnq2 is the major Kcnq gene transcript in dorsal root ganglion (DRG); immunostaining and patch-clamp recordings from acute ganglionic slices verified functional expression of Kv7.2 in small-diameter nociceptive DRG neurons. Neuropathic injury induced substantial downregulation of Kv7.2 expression. Levels of repressor element 1–silencing transcription factor (REST), which is known to suppress Kcnq2 expression, were upregulated in response to neuropathic injury identifying the likely mechanism of Kcnq2 regulation. Behavioural experiments demonstrated that neuropathic hyperalgesia following PSNL developed faster than the downregulation of Kcnq2 expression could be detected, suggesting that this transcriptional mechanism may contribute to the maintenance rather than the initiation of neuropathic pain. Importantly, the decrease in the peripheral M channel abundance could be functionally compensated by peripherally applied M channel opener flupirtine, which alleviated neuropathic hyperalgesia. Our work suggests a novel mechanism for neuropathic overexcitability and brings focus on M channels and REST as peripheral targets for the treatment of neuropathic pain.