The Vesicle-associated membrane protein (VAMP)-Associated Protein B (VAPB) is the causative gene of amyotrophic lateral sclerosis 8 (ALS8) in humans. Amyotrophic lateral sclerosis (ALS) is a progressive neurodegenerative disease characterized by selective death of motor neurons leading to spasticity, muscle atrophy and paralysis. VAP proteins have been implicated in various cellular processes, including intercellular signalling, synaptic remodelling, lipid transport and membrane trafficking and yet, the molecular mechanisms underlying ALS8 pathogenesis remain poorly understood. We identified the conserved phosphoinositide phosphatase Sac1 as a Drosophila VAP (DVAP)-binding partner and showed that DVAP is required to maintain normal levels of phosphoinositides. Downregulating either Sac1 or DVAP disrupts axonal transport, synaptic growth, synaptic microtubule integrity and the localization of several postsynaptic components. Expression of the disease-causing allele (DVAP-P58S) in a fly model for ALS8 induces neurodegeneration, elicits synaptic defects similar to those of DVAP or Sac1 downregulation and increases phosphoinositide levels. Consistent with a role for Sac1-mediated increase of phosphoinositide levels in ALS8 pathogenesis, we found that Sac1 downregulation induces neurodegeneration in a dosage-dependent manner. In addition, we report that Sac1 is sequestered into the DVAP-P58S-induced aggregates and that reducing phosphoinositide levels rescues the neurodegeneration and suppresses the synaptic phenotypes associated with DVAP-P58S transgenic expression. These data underscore the importance of DVAP–Sac1 interaction in controlling phosphoinositide metabolism and provide mechanistic evidence for a crucial role of phosphoinositide levels in VAP-induced ALS.