KCNQ channels belong to a family of potassium ion channels with crucial roles in physiology and disease. Heteromers of KCNQ2/3 subunits constitute the neuronal M channels. Inhibition of M currents, by pathways that stimulate phospholipase C activity, controls excitability throughout the nervous system. Here we show that a common feature of all KCNQ channels is their activation by the signaling membrane phospholipid phosphatidylinositol-bis-phosphate (PIP₂). We show that wortmannin, at concentrations that prevent recovery from receptor-mediated inhibition of M currents, blocks PIP₂ replenishment to the cell surface. Moreover, we identify a C-terminal histidine residue, immediately proximal to the plasma membrane, mutation of which renders M channels less sensitive to PIP₂ and more sensitive to receptor-mediated inhibition. Finally, native or recombinant channels inhibited by muscarinic agonists can be activated by PIP₂. Our data strongly suggest that PIP₂ acts as a membrane-diffusible second messenger to regulate directly the activity of KCNQ currents.