Understanding the mechanistic substrates of neural computations that lead to behavior remains a fundamental problem in neuroscience. In particular, the contributions of intrinsic neural properties such as burst firing and dendritic morphology to the processing of behaviorally relevant sensory input have received much interest recently. Pyramidal cells within the electrosensory lateral line lobe of weakly electric fish display an intrinsic bursting mechanism that relies on somato-dendritic interactions when recorded in vitro: backpropagating somatic action potentials trigger dendritic action potentials that lead to a depolarizing afterpotential (DAP) at the soma. We recorded intracellularly from these neurons in vivo and found firing patterns that were quite different from those seen in vitro: we found no evidence for DAPs as each somatic action potential was followed by a pronounced afterhyperpolarization (AHP). Calcium chelators injected in vivo reduced the AHP, thereby unmasking the DAP and inducing in vitro-like bursting in pyramidal cells. These bursting dynamics significantly reduced the cell's ability to encode the detailed time course of sensory input. We performed additional in vivo pharmacological manipulations and mathematical modeling to show that calcium influx through N-methyl-d-aspartate (NMDA) receptors activate dendritic small conductance (SK) calcium-activated potassium channels, which causes an AHP that counteracts the DAP and leads to early termination of the burst. Our results show that ion channels located in dendrites can have a profound influence on the processing of sensory input by neurons in vivo through the modulation of an intrinsic bursting mechanism.