P2X(7) receptors are non-selective cation channels gated by extracellular ATP. Prolonged stimulation of the P2X(7) receptor leads to an increase in cell permeability, cytokine release and apoptosis/necrosis. Application of PIP(2) to inside-out patches strongly activated all homomeric members of the P2X receptor family, including P2X(7) channels. Blockade of PIP(2) re-synthesis or induction of PIP(2) hydrolysis diminished ATP-gated P2X(7) currents. Several positively charged residues in the proximal C-terminus of P2X(7) were found to be important for PIP(2) interactions, as mutation of these sites reduced the apparent affinity for PIP(2) and enhanced current inhibition by PIP(2) depletion. In addition, we demonstrated the dependence of ATP-mediated cell death on P2X(7) receptor interaction with PIP(2) in three different cell systems: HEK cells stably transfected with P2X(7), primary T cells and a macrophage cell line. These results identify PIP(2) as a critical regulator of the function of the extracellular ligand-gated P2X receptor/channels and provide a novel way to control ATP-mediated cell death.