Phosphatidylinositol 4,5-bisphosphate (PIP2) is involved in the organization of the actin cytoskeleton by regulating actin-associated proteins. The transmembrane heparan sulfate proteoglycan syndecan-4 also plays a critical role in protein kinase C (PKC) signaling in the formation of focal adhesions and actin stress fibers. The cytoplasmic domain of syndecan- 4 core protein directly interacts with and potentiates PKCα activity, and it can directly interact with the phosphoinositide PIP2. We, therefore, investigated whether the interaction of inositol phosphates and inositol phospholipids with syndecan-4 could regulate PKC activity. Data from in vitro kinase assays using purified PKCαβγ show that in the absence of phosphatidylserine and diolein, PIP2 increased the extent of autophosphorylation of PKCαβγ and partially activated it to phosphorylate both histone III-S and an epidermal growth factor receptor peptide. This activity was dose-dependent, and its calcium dependence varied with PKC isotype/source. Addition of the cytoplasmic syndecan-4 peptide, but not equivalent syndecan-1 or syndecan-2 peptides, potentiated the partial activation of PKCαβγ by PIP2, resulting in activity greater than that observed with phosphatidylserine, diolein, and calcium. This study indicates that syndecan-4 cytoplasmic domain may bind both PIP2 and PKCα, localize them to forming focal adhesions, and potentiate PKCα activity there.