Cofilin is a widely distributed actin-modulating protein that has abilities to bind along the side of F-actin and to depolymerize F-actin. Both abilities of cofilin can be inhibited by phosphoinositides such as phosphatidylinositol, phosphatidylinositol 4-monophosphate, and phosphatidylinositol 4,5-bisphosphate (PIP2). We have previously shown that the synthetic dodecapeptide corresponding to Trp104-Met115 of cofilin is a potent inhibitor of actin polymerization (Yonezawa, N., Nishida, E., Iida, K., Kumagai, H., Yahara, I., and Sakai, H. (1991) J. Biol. Chem. 266, 10485-10489). In this study, we have found that the inhibitory effect of the synthetic dodecapeptide on actin polymerization is canceled specifically by phosphatidylinositol, phosphatidylinositol 4-monophosphate and PIP2. We further show that the dodecapeptide as well as cofilin binds to PIP2 molecules and inhibits PIP2 hydrolysis by phospholipase C. Thus, the actin-binding dodecapeptide sequence of cofilin may constitute a multifunctional domain in cofilin.