Generation and turnover of phosphoinositides (PIs) must be coordinated in a spatial- and temporal-restricted manner. The small GTPase Rab5 interacts with two PI 3-kinases, Vps34 and PI3Kbeta, suggesting that it regulates the production of 3-PIs at various stages of the early endocytic pathway. Here, we discovered that Rab5 also interacts directly with PI 5- and PI 4-phosphatases and stimulates their activity. Rab5 regulates the production of phosphatidylinositol 3-phosphate (PtdIns[3]P) through a dual mechanism, by directly phosphorylating phosphatidylinositol via Vps34 and by a hierarchical enzymatic cascade of phosphoinositide-3-kinasebeta (PI3Kbeta), PI 5-, and PI 4-phosphatases. The functional importance of such an enzymatic pathway is demonstrated by the inhibition of transferrin uptake upon silencing of PI 4-phosphatase and studies in weeble mutant mice, where deficiency of PI 4-phosphatase causes an increase of PtdIns(3,4)P2 and a reduction in PtdIns(3)P. Activation of PI 3-kinase at the plasma membrane is accompanied by the recruitment of Rab5, PI 4-, and PI 5-phosphatases to the cell cortex. Our data provide the first evidence for a dual role of a Rab GTPase in regulating both generation and turnover of PIs via PI kinases and phosphatases to coordinate signaling functions with organelle homeostasis.