We present in vivo dynamic-clamp electrophysiological recordings to characterize the influences of shunting inhibition and the potassium current I BK on the input–output (I/O) transfer function of cortical neurons, in response to both artificial (injected current or conductance) and functional visual stimuli. In comparison to previous experimental and theoretical studies, we find that realistic levels of shunting inhibition have a significant divisive effect on the firing gain. We also quantitatively characterize the effect of shunting inhibition on threshold and saturation. Shunting inhibition applied by dynamic-clamp also has a non-linear effect on visual responses, not only reducing the response but also significantly changing the timing of the response. We confirm predictions that I BK facilitates spike firing, despite this being a hyperpolarizing current. This effect is demonstrated by an increase in both the gain of the I/O transfer function, e.g. the f/I curve, and visual responses.