AMP deaminase (AMPD) converts AMP to IMP and is a diverse and highly regulated enzyme that is a key component of the adenylate catabolic pathway. In this report, we identify the high affinity interaction between AMPD and phosphoinositides as a mechanism for regulation of this enzyme. We demonstrate that endogenous rat brain AMPD and the human AMPD3 recombinant enzymes specifically bind inositide-based affinity probes and to mixed lipid micelles that contain phosphatidylinositol 4,5-bisphosphate. Moreover, we show that phosphoinositides specifically inhibit AMPD catalytic activity. Phosphatidylinositol 4,5-bisphosphate is the most potent inhibitor, effecting pure noncompetitive inhibition of the wild type human AMPD3 recombinant enzyme with a K(i) of 110 nM. AMPD activity can be released from membrane fractions by in vitro treatment with neomycin, a phosphoinositide-binding drug. In addition, in vivo modulation of phosphoinositide levels leads to a change in the soluble and membrane-associated pools of AMPD activity. The predicted human AMPD3 sequence contains pleckstrin homology domains and (R/K)X(n)(R/K)XKK sequences, both of which are characterized phosphoinositide-binding motifs. The interaction between AMPD and phosphoinositides may mediate membrane localization of the enzyme and function to modulate catalytic activity in vivo.