Most transient receptor potential (TRP) channels are regulated by phosphatidylinositol-4,5-biphosphate (PIP ₂ ), although the structural rearrangements occurring on PIP ₂ binding are currently far from clear. Here we report that activation of the TRP vanilloid 4 (TRPV4) channel by hypotonic and heat stimuli requires PIP ₂ binding to and rearrangement of the cytosolic tails. Neutralization of the positive charges within the sequence ¹²¹ KRWRK ¹²⁵ , which resembles a phosphoinositide-binding site, rendered the channel unresponsive to hypotonicity and heat but responsive to 4α-phorbol 12,13-didecanoate, an agonist that binds directly to transmembrane domains. Similar channel response was obtained by depletion of PIP ₂ from the plasma membrane with translocatable phosphatases in heterologous expression systems or by activation of phospholipase C in native ciliated epithelial cells. PIP ₂ facilitated TRPV4 activation by the osmotransducing cytosolic messenger 5′-6’-epoxyeicosatrienoic acid and allowed channel activation by heat in inside-out patches. Protease protection assays demonstrated a PIP ₂ -binding site within the N-tail. The proximity of TRPV4 tails, analyzed by fluorescence resonance energy transfer, increased by depleting PIP ₂ mutations in the phosphoinositide site or by coexpression with protein kinase C and casein kinase substrate in neurons 3 (PACSIN3), a regulatory molecule that binds TRPV4 N-tails and abrogates activation by cell swelling and heat. PACSIN3 lacking the Bin-Amphiphysin-Rvs (F-BAR) domain interacted with TRPV4 without affecting channel activation or tail rearrangement. Thus, mutations weakening the TRPV4–PIP ₂ interacting site and conditions that deplete PIP ₂ or restrict access of TRPV4 to PIP ₂ —in the case of PACSIN3—change tail conformation and negatively affect channel activation by hypotonicity and heat.