Internalization of agonist-activated G protein-coupled receptors is mediated by non-visual arrestins, which also bind to clathrin and are therefore thought to act as adaptors in the endocytosis process. Phosphoinositides have been implicated in the regulation of intracellular receptor trafficking, and are known to bind to other coat components including AP-2, AP180 and COPI coatomer. Given these observations, we explored the possibility that phosphoinositides play a role in arrestin's function as an adaptor. High-affinity binding sites for phosphoinositides in beta-arrestin (arrestin2) and arrestin3 (beta-arrestin2) were identified, and dissimilar effects of phosphoinositide and inositol phosphate on arrestin interactions with clathrin and receptor were characterized. Alteration of three basic residues in arrestin3 abolished phosphoinositide binding with complete retention of clathrin and receptor binding. Unlike native protein, upon agonist activation, this mutant arrestin3 expressed in COS1 cells neither supported beta2-adrenergic receptor internalization nor did it concentrate in coated pits, although it was recruited to the plasma membrane. These findings indicate that phosphoinositide binding plays a critical regulatory role in delivery of the receptor-arrestin complex to coated pits, perhaps by providing, with activated receptor, a multi-point attachment of arrestin to the plasma membrane.