Phosphatidylinositol-4,5-bisphosphate (PtdIns(4,5)P₂) has an important function in cell regulation both as a precursor of second messenger molecules and by means of its direct interactions with cytosolic and membrane proteins. Biochemical studies have suggested a role for PtdIns(4,5)P₂ in clathrin coat dynamics, and defects in its dephosphorylation at the synapse produce an accumulation of coated endocytic intermediates. However, the involvement of PtdIns(4,5)P₂ in synaptic vesicle exocytosis remains unclear. Here, we show that decreased levels of PtdIns(4,5)P₂ in the brain and an impairment of its depolarization-dependent synthesis in nerve terminals lead to early postnatal lethality and synaptic defects in mice. These include decreased frequency of miniature currents, enhanced synaptic depression, a smaller readily releasable pool of vesicles, delayed endocytosis and slower recycling kinetics. Our results demonstrate a critical role for PtdIns(4,5)P₂ synthesis in the regulation of multiple steps of the synaptic vesicle cycle.