Polyphosphoinositides have many roles in cell signalling and vesicle trafficking [1-3]. Phosphatidylinositol 3,5-bisphosphate (PI(3,5)P2), a recently discovered PIP2 isomer, is ubiquitous in eukaryotic cells and rapidly accumulates in hyperosmotically stressed yeast. PI(3,5)P2 is synthesised from PI(3)P in both yeast and mammalian cells [4,5]. A search of the Saccharomyces cerevisiae genome database identified FAB1, a gene encoding a PIP kinase homologue and potential PI(3)P 5-kinase. Fab1p shows PI(3)P 5-kinase activity both in vivo and in vitro. A yeast strain in which FAB1 had been deleted was unable to synthesise PI(3,5)P2, either in the presence or absence of osmotic shock. A loss of PI(3,5)P2 was observed also in a temperature-sensitive FAB1 strain at the non-permissive temperature. A recombinant glutathione-S-transferase (GST)-Fab1p fusion protein was shown to have selective PI(3)P 5-kinase activity in vitro. Thus, we have demonstrated that Fab1p is a PI(3)P-specific 5-kinase and represents a third class of PIP kinase activity, which we have termed type III. Deletion of the FAB1 gene produces a loss of vacuolar morphology ; it is therefore concluded that PI(3,5)P2, the lipid product of Fab1p, is required for normal vacuolar function.