Growing evidence suggests that phosphoinositides play an important role in membrane traffic. A polyphosphoinositide phosphatase, synaptojanin 1, was identified as a major presynaptic protein associated with endocytic coated intermediates. We report here that synaptojanin 1-deficient mice exhibit neurological defects and die shortly after birth. In neurons of mutant animals, PI(4,5)P2 levels are increased, and clathrin-coated vesicles accumulate in the cytomatrix-rich area that surrounds the synaptic vesicle cluster in nerve endings. In cell-free assays, reduced phosphoinositide phosphatase activity correlated with increased association of clathrin coats with liposomes. Intracellular recording in hippocampal slices revealed enhanced synaptic depression during prolonged high-frequency stimulation followed by delayed recovery. These results provide genetic evidence for a crucial role of phosphoinositide metabolism in synaptic vesicle recycling.