PTEN (phosphatase and tensin homologue deleted on chromosome 10) is a tumor suppressor that is mutated or deleted in a variety of human tumors, and even loss of only one PTEN gene profoundly affects carcinogenesis. PTEN encodes a phosphatidylinositol phosphate phosphatase specific for the 3-position of the inositol ring. Despite its importance, we are just beginning to understand the regulatory circuits that maintain the correct levels of PTEN phosphatase activity. Several independent studies reported that PI(4,5)P2 enhances PTEN phosphatase activity, but the reasons for this enhancement are currently being debated. In this study, PTEN bound to PI(4,5)P2-bearing vesicles has increased alpha-helicity, providing direct spectroscopic proof of a conformational change. Neither PI(3,5)P2 nor PI(3,4,5)P3 induced this conformational change. On the basis of experiments with two mutant PTEN proteins, it is shown that PI(4,5)P2 induces this conformational change by binding to the PTEN N-terminal domain. Using PTEN protein and a 21-amino acid peptide based on the PTEN N-terminus, we tested all natural phosphatidylinositol phosphates and found preferential binding of PI(4,5)P2. PTEN also binds to phosphatidylserine-bearing vesicles, resulting in a slight increase in beta-sheet content. In addition, PTEN binds synergistically to PI(4,5)P2 and phosphatidylserine, and hence, these anionic lipids do not compete for PTEN binding sites. Collectively, these results demonstrate that PTEN binds to membranes through multiple sites, but only PI(4,5)P2 binding to the N-terminal domain triggers a conformational change with increased alpha-helicity.