Phospholipid-enriched membranes such as the plasma membrane can serve as direct regulators of kinase signaling. Pak1 is involved in growth factor signaling at the plasma membrane, and its dysregulation is implicated in cancer. Pak1 adopts an autoinhibited conformation that is relieved upon binding to membrane-bound Rho GTPases Rac1 or Cdc42, but whether lipids also regulate Pak1 in vivo is unknown. We show here that phosphoinositides, particularly PIP(2), potentiate Rho-GTPase-mediated Pak1 activity. A positively charged region of Pak1 binds to phosphoinositide-containing membranes, and this interaction is essential for membrane recruitment and activation of Pak1 in response to extracellular signals. Our results highlight an active role for lipids as allosteric regulators of Pak1 and suggest that Pak1 is a "coincidence detector" whose activation depends on GTPases present in phosphoinositide-rich membranes. These findings expand the role of phosphoinositides in kinase signaling and suggest how altered phosphoinositide metabolism may upregulate Pak1 activity in cancer cells.