Phosphatidylinositol 4,5-bisphosphate (PIP2) is an important cellular effector whose functions include the regulation of ion channels and membrane trafficking. Aberrant PIP2 metabolism has also been implicated in a variety of human disease states, e.g., cancer and diabetes. Here we report that familial Alzheimer's disease (FAD)-associated presenilin mutations cause an imbalance in PIP2 metabolism. We find that the transient receptor potential melastatin 7 (TRPM7)-associated Mg2+ -inhibited cation (MIC) channel underlies ion channel dysfunction in presenilin FAD mutant cells, and the observed channel deficits are restored by the addition of PIP2, a known regulator of the MIC/TRPM7 channel. Lipid analyses show that PIP2 turnover is selectively affected in FAD mutant presenilin cells. We also find that modulation of cellular PIP2 closely correlates with 42-residue amyloid beta-peptide (Abeta42) levels. Our data suggest that PIP2 imbalance may contribute to Alzheimer's disease pathogenesis by affecting multiple cellular pathways, such as the generation of toxic Abeta42 as well as the activity of the MIC/TRPM7 channel, which has been linked to other neurodegenerative conditions. Thus, our study suggests that brain-specific modulation of PIP2 may offer a therapeutic approach in Alzheimer's disease.