Phosphoinositide 3-kinases (PI3Ks) have been shown to play critical roles in cell growth, differentiation, survival, and vesicular transport. Class II PI3Ks have been recently identified in mouse and human (PI3K-C2 alpha/m-p170/m-cpk and HsC2-PI3K) and in Drosophila (PI3K 68D/cpk) which contain C2 domain at the C-terminus. However, their physiological function is largely unknown. We report here cloning and characterization of murine PI3K-C2 gamma, a novel class II PI3K. The catalytic domain as well as C2 domain are highly conserved in the Class II PI3K family, while the N-terminal regions of these proteins share little similarity. Unlike other Class II PI3Ks, PI3K-C2 gamma exclusively expressed in the liver, and a N-terminal truncated form was found in lung and a certain hematopoietic cell line. Specific antiserum against PI3K-C2 gamma precipitated PI3K activity from the membrane fraction of mouse liver but not from heart. Recombinant PI3K-C2 gamma exhibited a restricted lipid substrate specificity; it phosphorylated phosphatidylinositol (PtdIns) and PtdIns4P but not PtdIns(4,5)P2. Deletion mutations revealed that both the N-terminal region and the C2 domain were critical for enzymatic activity. The murine PI3K-C2 gamma gene locus was mapped to the distal region of mouse chromosome 6 in a region of homology with human chromosome 12p, which is distinct from the position of HsC2-PI3K. Cloning and biochemical characterization of the third member of class II PI3Ks provide a new insight into the function of this subfamily of PI3Ks.