Inositol phospholipids play multiple roles in cell signalling systems. Two widespread eukaryotic phosphoinositide-based signal transduction mechanisms, phosphoinositidase C-catalysed phosphatidylinositol-4,5-bisphosphate (PtdIns(4,5)P2) hydrolysis and 3-OH kinase-catalysed PtdIns(4,5)P2 phosphorylation, make the second messengers inositol 1,4,5-trisphosphate (Ins(1,4,5)P3) sn-1,2-diacylglycerol and PtdIns(3,4,5)P3. In addition, PtdIns(4,5)P2 and PtdIns3P have been implicated in exocytosis and membrane trafficking. We now show that when the yeasts Saccharomyces cerevisiae and Schizosaccharomyces pombe are hyperosmotically stressed, they rapidly synthesize phosphatidylinositol-3,5-bisphosphate (PtdIns(3,5)P2) by a process that involves activation of a PtdIns3P 5-OH kinase. This PtdIns(3,5)P2 accumulation only occurs in yeasts that have an active vps34-encoded PtdIns 3-OH kinase, showing that this latter kinase makes the PtdIns3P needed for PtdIns(3,5)P2 synthesis and indicating that PtdIns(3,5)P2 may have a role in sorting vesicular proteins. PtdIns(3,5)P2 is also present in mammalian and plant cells: in monkey Cos-7 cells, its labelling is inversely related to the external osmotic pressure. The stimulation of a PtdIns3P 5-OH kinase-catalysed synthesis of PtdIns(3,5)P2, a molecule that might be a new type of phosphoinositide 'second messenger, thus appears to be central to a widespread and previously uncharacterized regulatory pathway.