ADP-ribosylation factors (ARFs) have been implicated as ubiquitous regulators of multiple steps in both exocytic and endocytic membrane traffic in yeast and mammalian cells. More specific interactions have also been described for ARF proteins with an ARF-specific GTP-ase-activating protein and as activators of phospholipase D activity. These protein interactions have defined requirements for phosphatidylinositol 4,5-bisphosphate (PIP2). Direct interactions between ARF1 and PIP2 or other phospholipids were tested by examining effects on guanine nucleotide binding kinetics. PIP2 (400 microM) increased the rate of GDP dissociation > 100-fold. Several other acid phospholipids had more modest effects (4-7-fold) on GDP dissociation rates, while other phospholipids had no effect. PIP2 also had the greatest effect on the rate of binding of guanosine 5'-(gamma-thio)triphosphate (GTP gamma S), increasing it almost 100-fold at early time points. However, at later times (> 5 min), PIP2 caused a paradoxical loss of nucleotide binding to ARF1. PIP2 was found to stabilize the nucleotide-free form of ARF1 as subsequent dilution of PIP2 allowed ARF1 to bind GTP gamma S to high stoichiometry. The demonstration of direct interaction between ARF1 and PIP2 provides the basis for a model in which PIP2 acts as a cofactor in some of the interactions between ARF1 and other proteins.