ATP-sensitive potassium channels (KATP channels) regulate cell excitability in response to metabolic changes. KATP channels are formed as a complex of a sulfonylurea receptor (SURx), a member of the ATP-binding cassette protein family, and an inward rectifier K+ channel subunit (Kir6.x). Membrane phospholipids, in particular phosphatidylinositol (PI) 4,5-bisphosphate (PIP2), activate KATP channels and antagonize ATP inhibition of KATP channels when applied to inside-out membrane patches. To examine the physiological relevance of this regulatory mechanism, we manipulated membrane PIP2 levels by expressing either the wild-type or an inactive form of PI-4-phosphate 5-kinase (PIP5K) in COSm6 cells and examined the ATP sensitivity of coexpressed KATP channels. Channels from cellsfexpressing the wild-type PIP5K have a 6-fold lower ATP sensitivity (K1/2, the half maximal inhibitory concentration, 60 µM) than the sensitivities from control cells (K1/2 10 µM). An inactive form of the PIP5K had little effect on the K1/2 of wild-type channels but increased the ATP-sensitivity of a mutant KATP channel that has an intrinsically lower ATP sensitivity (from K1/2 450 µM to K1/2 100 µM), suggesting a decrease in membrane PIP2 levels as a consequence of a dominant-negative effect of the inactive PIP5K. These results show that PIP5K activity, which regulates PIP2 and PI-3,4,5-P3 levels, is a significant determinant of the physiological nucleotide sensitivity of KATP channels.