Phosphatidylinositol-4,5-bisphosphate (PtdIns(4,5)P2) has an important function in cell regulation both as a precursor of second messenger molecules and by means of its direct interactions with cytosolic and membrane proteins. Biochemical studies have suggested a role for PtdIns(4,5)P2 in clathrin coat dynamics, and defects in its dephosphorylation at the synapse produce an accumulation of coated endocytic intermediates. However, the involvement of PtdIns(4,5)P2 in synaptic vesicle exocytosis remains unclear. Here, we show that decreased levels of PtdIns(4,5)P2 in the brain and an impairment of its depolarization-dependent synthesis in nerve terminals lead to early postnatal lethality and synaptic defects in mice. These include decreased frequency of miniature currents, enhanced synaptic depression, a smaller readily releasable pool of vesicles, delayed endocytosis and slower recycling kinetics. Our results demonstrate a critical role for PtdIns(4,5)P2 synthesis in the regulation of multiple steps of the synaptic vesicle cycle.