The KATP channel is a heterooctamer composed of two different subunits, four inwardly rectifying K+ channel subunits, either Kir6. 1 or Kir6.2, and four sulfonylurea receptors (SUR), which belong to the family of ABC transporters. This unusual molecular architecture is related to the complex gating behaviour of these channels. Intracellular ATP inhibits KATP channels by binding to the Kir6.x subunits, whereas Mg-ADP increases channel activity by a hydrolysis reaction at the SUR. This ATP/ADP dependence allows KATP channels to link metabolism to excitability, which is important for many physiological functions, such as insulin secretion and cell protection during periods of ischemic stress. Recent work has uncovered a new class of regulatory molecules for KATP channel gating. Membrane phospholipids such as phosphoinositol 4, 5-bisphosphate and phosphatidylinositiol 4-monophosphate were found to interact with KATP channels resulting in increased open probability and markedly reduced ATP sensitivity. The membrane concentration of these phospholipids is regulated by a set of enzymes comprising phospholipases, phospholipid phosphatases and phospholipid kinases providing a possible mechanism for control of cell excitability through signal transduction pathways that modulate activity of these enzymes. This review discusses the mechanisms and molecular determinants that underlie gating of KATP channel by nucleotides and phospholipids and their physiological implications.