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 aK(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.