Establishment of cell polarity is important for a wide range of biological processes, from asymmetric cell growth in budding yeast to neurite formation in neurons. In the yeast Saccharomyces cerevisiae, the small GTPase Cdc42 controls polarized actin organization and exocytosis toward the bud. Gic2, a Cdc42 effector, is targeted to the bud tip and plays an important role in early bud formation. The GTP-bound Cdc42 interacts with Gic2 through the Cdc42/Rac interactive binding domain located at the N terminus of Gic2 and activates Gic2 during bud emergence. Here we identify a polybasic region in Gic2 adjacent to the Cdc42/Rac interactive binding domain that directly interacts with phosphatidylinositol 4,5-bisphosphate in the plasma membrane. We demonstrate that this interaction is necessary for the polarized localization of Gic2 to the bud tip and is important for the function of Gic2 in cell polarization. We propose that phosphatidylinositol 4,5-bisphosphate and Cdc42 act in concert to regulate polarized localization and function of Gic2 during polarized cell growth in the budding yeast.Generation of cell polarity is critical for many basic cellular functions such as nutrient transport across epithelial cells and neuronal transmission in neurons. Cell polarization generally occurs by the delivery of proteins and lipids to specific sites on the plasma membrane (PM), 4 thus generating distinct cellular domains. Budding yeast is an excellent model organism for the study of cell polarity because polarized actin organization and membrane traffic are important for bud formation and major proteins involved in cell polarization are conserved in higher eukaryotes (1-3). Cdc42, a member of the Rho family of small GTP-binding proteins and a master regulator of cell polarity, controls polarized organization of actin cables and the exocytosis machinery for bud emergence and enlargement (3, 4). Gic2, and its homolog, Gic1, are a pair of Cdc42 effectors that each contain an N-terminal Cdc42/Rac Interactive Binding (CRIB) domain, which interacts with GTP-bound Cdc42 (5, 6). Deletion of GIC1 and GIC2 together, but not either one alone, causes cells to arrest in large, round, and unbudded morphologies at 37°C, indicative of the loss of cell polarity (5, 6). Gic2 is localized to the site of bud emergence and at tips of small buds in yeast and is required for polarized actin organization during budding at 37°C (5, 6). Gic2 is thought to function in polarized growth by linking activated Cdc42 to proteins that regulate actin organization, such as Bni1, Spa2, and Bud6 (7). Recently, it was shown that Gic1 and Gic2 are also involved in the recruitment of septins to the presumptive bud site at the beginning of the cell cycle (8). Gic1 and Gic2 have overlapping functions, as cells that have lost either Gic1 or Gic2 are mostly normal in morphology and growth whereas cells that have lost both Gic proteins have morphological defects (including defects in actin polarization) as well as a severe growth defect at 37°C (5, 6). Gic2 is expressed ...