Potassium is the main intracellular ion for all types of cells, while having a major role in maintenance of fluid and electrolyte balance. Potassium is necessary for the function of all living cells and is thus present in all plant and animal tissues. It is found in especially high concentrations within plant cells, and in a mixed diet, it is most highly concentrated in fruits. The high concentration of potassium in plants, associated with comparatively very low amounts of sodium there, historically resulted in potassium first being isolated from the ashes of plants (potash), which in turn gave the element its modern name. The high concentration of potassium in plants means that heavy crop production rapidly depletes soils of potassium, and agricultural fertilizers consume 93% of the potassium chemical production of the modern world economy.

The functions of potassium and sodium in living organisms are quite different. Animals, in particular, employ sodium and potassium differentially to generate electrical potentials in animal cells, especially in nervous tissue. Potassium depletion in animals, including humans, results in various neurological dysfunctions. Characteristic concentrations of potassium in model organisms are: 30–300 mM in E. coli, 300 mM in budding yeast, 100 mM in mammalian cell and 4 mM in blood plasma.

The main role of potassium in plants is to provide the ionic environment for metabolic processes in the cytosol, and as such functions as a regulator of various processes including growth regulation. Plants require potassium ions (K⁺) for protein synthesis and for the opening and closing of stomata, which is regulated by proton pumps to make surrounding guard cells either turgid or flaccid. A deficiency of potassium ions can impair a plant's ability to maintain these processes. Potassium also functions in other physiological processes such as photosynthesis, protein synthesis, activation of some enzymes, phloem solute transport of photoassimilates into source organs, and maintenance of cation:anion balance in the cytosol and vacuole.

Potassium is the major cation (K⁺, a positive ion) inside animal cells, while sodium (Na⁺) is the major cation outside animal cells. The difference between the concentrations of these charged particles causes a difference in electric potential between the inside and outside of cells, known as the membrane potential. The balance between potassium and sodium is maintained by ion transporters in the cell membrane. All potassium ion channels are tetramers with several conserved secondary structural elements. A number of potassium channel structures have been solved including voltage gated, ligand gated, tandem-pore, and inwardly rectifying channels, from prokaryotes and eukaryotes. The cell membrane potential created by potassium and sodium ions allows the cell to generate an action potential—a "spike" of electrical discharge. The ability of cells to produce electrical discharge is critical for body functions such as neurotransmission, muscle contraction, and heart function.

The U.S. National Academy of Medicine (NAM), on behalf of both the U.S. and Canada, sets Dietary Reference Intakes, including Estimated Average Requirements (EARs) and Recommended Dietary Allowances (RDAs), or Adequate Intakes (AIs) for when there is not sufficient information to set EARs and RDAs.

For both males and females under 9 years of age, the AIs for potassium are: 400 mg of potassium for 0 to 6-month-old infants, 860 mg of potassium for 7 to 12-month-old infants, 2,000 mg of potassium for 1 to 3-year-old children, and 2,300 mg of potassium for 4 to 8-year-old children.

For males 9 years of age and older, the AIs for potassium are: 2,500 mg of potassium for 9 to 13-year-old males, 3,000 mg of potassium for 14 to 18-year-old males, and 3,400 mg for males that are 19 years of age and older.

For females 9 years of age and older, the AIs for potassium are: 2,300 mg of potassium for 9 to 18-year-old females, and 2,600 mg of potassium for females that are 19 years of age and older.