ATP-sensitive K(+) channels (K(ATP) channels) of pancreatic beta-cells play key roles in glucose-stimulated insulin secretion by linking metabolic signals to cell excitability. Membrane phosphoinositides, in particular phosphatidylinositol 4,5-bisphosphates (PIP(2)), stimulate K(ATP) channels and decrease channel sensitivity to ATP inhibition; as such, they have been postulated as critical regulators of K(ATP) channels and hence of insulin secretion in beta-cells. Here, we tested this hypothesis by manipulating the interactions between K(ATP) channels and membrane phospholipids in a beta-cell line, INS-1, and assessing how the manipulations affect membrane excitability and insulin secretion. We demonstrate that disruption of channel interactions with PIP(2) by overexpressing PIP(2)-insensitive channel subunits leads to membrane depolarization and elevated basal level insulin secretion at low glucose concentrations. By contrast, facilitation of channel interactions with PIP(2) by upregulating PIP(2) levels via overexpression of a lipid kinase, phosphatidylinositol 4-phosphate 5 kinase, decreases the ATP sensitivity of endogenous K(ATP) channels by approximately 26-fold and renders INS-1 cells hyperpolarized, unable to secrete insulin properly in the face of high glucose. Our results establish an important role of the interaction between membrane phosphoinositides and K(ATP) channels in regulating insulin secretion.