Twinfilin is a ubiquitous actin monomer-binding protein that regulates actin filament turnover in yeast and mammalian cells. To elucidate the mechanism by which twinfilin contributes to actin filament dynamics, we carried out an analysis of yeast twinfilin, and we show here that twinfilin is an abundant protein that localizes to cortical actin patches in wild-type yeast cells. Native gel assays demonstrate that twinfilin binds ADP-actin monomers with higher affinity than ATP-actin monomers. A mutant twinfilin that does not interact with actin monomers in vitro no longer localizes to cortical actin patches when expressed in yeast, suggesting that the ability to interact with actin monomers may be essential for the localization of twinfilin. The localization of twinfilin to the cortical actin cytoskeleton is also disrupted in yeast strains where either the CAP1 or CAP2 gene, encoding for the alpha and beta subunits of capping protein, is deleted. Purified twinfilin and capping protein form a complex on native gels. Twinfilin also interacts with phosphatidylinositol 4,5-bisphosphate (PI[4,5]P2), and its actin monomer-sequestering activity is inhibited by PI(4,5)P2. Based on these results, we propose a model for the biological role of twinfilin as a protein that localizes actin monomers to the sites of rapid filament assembly in cells.