Actin cytoskeleton remodeling requires the coordinated action of a large number of actin binding proteins that reorganize the actin cytoskeleton by promoting polymerization, stabilizing filaments, causing branching, or crosslinking filaments. Palladin is a key cytoskeletal actin binding protein whose normal function is to enable cell motility during development of tissues and organs of the embryo and in wound healing, but palladin is also responsible for regulating the ability of cancer cells to become invasive and metastatic. The membrane phosphoinositide phosphatidylinositol (PI) 4,5-bisphosphate [PI(4,5)P-2] is a well-known precursor for intracellular signaling and a bona fide regulator of actin cytoskeleton reorganization. Our results show that two palladin domains [immunoglobulin (Ig) 3 and 34] interact with the head group of PI(4,5)P-2 with moderate affinity (apparent K-d = 17 mu M). Interactions with PI(4,5)P-2 decrease the actin polymerizing activity of Ig domain 3 of palladin (Palld-Ig3). Furthermore, NMR titration and docking studies show that residues K38 and K51, which are present on the beta-sheet C and D, form salt bridges with the head group of PI(4,5)P-2. Moreover, charge neutralization at lysine 38 in the Palld-Ig3 domain severely limits the actin polymerizing and bundling activity of Palld-Ig3. Our results provide biochemical proof that PI(4,5)P-2 functions as a moderator of palladin activity and have also identified residues directly involved in the crosslinking activity of palladin.