Adenosine triphosphate (ATP)-sensitive potassium (KATP) channels couple electrical activity to cellular metabolism through their inhibition by intracellular ATP. ATP inhibition of KATP channels varies among tissues and is affected by the metabolic and regulatory state of individual cells, suggesting involvement of endogenous factors. It is reported here that phosphatidylinositol-4, 5-bisphosphate (PIP2) and phosphatidylinositol-4-phosphate (PIP) controlled ATP inhibition of cloned KATP channels (Kir6.2 and SUR1). These phospholipids acted on the Kir6.2 subunit and shifted ATP sensitivity by several orders of magnitude. Receptor-mediated activation of phospholipase C resulted in inhibition of KATP-mediated currents. These results represent a mechanism for control of excitability through phospholipids.