Stimulation of purinergic receptors inhibits amiloride-sensitive Na+ transport in epithelial tissues by an unknown mechanism. Because previous studies excluded the role of intracellular Ca2+ or protein kinase C, we examined whether purinergic regulation of Na+ absorption occurs via hydrolysis of phospholipid such as phosphatidylinositol-bisphosphates (PIP2). Inhibition of amiloride-sensitive short-circuit currents (Isc-Amil) by adenine 5'-triphosphate (ATP) in native tracheal epithelia and M1 collecting duct cells was suppressed by binding neomycin to PIP2, and recovery from ATP inhibition was abolished by blocking phosphatidylinositol-4-kinase or diacylglycerol kinase. Stimulation by ATP depleted PIP2 from apical membranes, and PIP2 co-immunoprecipitated the beta subunit of ENaC. ENaC was inhibited by ATP stimulation of P2Y2 receptors in Xenopus oocytes. Mutations in the PIP2 binding domain of betaENaC but not gammaENaC reduced ENaC currents without affecting surface expression. Collectively, these data supply evidence for a novel and physiologically relevant regulation of ENaC in epithelial tissues. Although surface expression is controlled by its C terminus, N-terminal binding of betaENaC to PIP2 determines channel activity.