Several components of the phosphoinositide cycle have been found to interact specifically and at physiological concentrations with the plasma membrane-associated clathrin assembly (adaptor) protein AP-2. These include phosphatidylinositol 4,5-bisphosphate and inositol 1,4,5-trisphosphate, which are present at the plasma membrane, as well as other polyphosphoinositols. ATP and other polyphosphate molecules complete with the polyphosphoinositols, however, they are at least 80-fold less potent. Also, the effect of ATP, unlike the polyphosphoinositols, is blocked by physiological concentrations of Mg2+. Photoaffinity labeling of AP-2 by [alpha-32P]8-azidoadenosine 5'-triphosphate and its competition by polyphosphoinositols has been used to identify the alpha subunit of the AP-2 complex as the site of specific interaction with the polyphosphoinositols and to confirm direct ultrafiltration binding experiments. Proteolytic dissection of the labeled AP-2 demonstrated that binding occurred exclusively on the N-terminal portion of the alpha subunit. Interaction of purified AP-2 with sub-microM concentrations of polyphosphoinositols has inhibitory effects on a novel AP-2 self-association described in the accompanying paper (Beck, K. A., and Keen, J. H., J. Biol. Chem. 266, 4437-4441), and at higher concentrations on the binding of AP-2 to dissociated clathrin trimers as well as AP-2-mediated clathrin coat assembly. Review of the literature shows that several physiological stimuli that are known to result in increased coat pit formation in intact cells correlate with increased phosphoinositide turnover. These in vivo correlations and the in vitro observations reported here suggest that coated membrane and phosphoinositide cycles may be interdependent within cells.