Inositol polyphosphate 5-phosphatases can terminate downstream signalling of phosphatidylinositol-3 kinase; however, their biological role in the pathogenesis of cancer is controversial. Here we report that the inositol polyphosphate 5-phosphatase, phosphatidylinositol 4,5-bisphosphate 5-phosphatase, has a tumour suppressive role in melanoma. Although it is commonly downregulated in melanoma, overexpression of phosphatidylinositol 4,5-bisphosphate 5-phosphatase blocks Akt activation, inhibits proliferation and undermines survival of melanoma cells in vitro, and retards melanoma growth in a xenograft model. In contrast, knockdown of phosphatidylinositol 4,5-bisphosphate 5-phosphatase results in increased proliferation and anchorage-independent growth of melanocytes. Although DNA copy number loss is responsible for downregulation of phosphatidylinositol 4,5-bisphosphate 5-phosphatase in a proportion of melanomas, histone hypoacetylation mediated by histone deacetylases HDAC2 and HDAC3 through binding to the transcription factor Sp1 at the PIB5PA gene promoter appears to be another commonly involved mechanism. Collectively, these results establish the tumour suppressive role of phosphatidylinositol 4,5-bisphosphate 5-phosphatase and reveal mechanisms involved in its downregulation in melanoma.