The regulation of M-type (KCNQ [Kv7]) K(+) channels by phosphatidylinositol 4,5-bisphosphate (PIP(2)) has perhaps the best correspondence to physiological signaling, but the site of action and structural motif of PIP(2) on these channels have not been established. Using single-channel recordings of chimeras of Kv7.3 and 7.4 channels with highly differential PIP(2) sensitivities, we localized a carboxy-terminal inter-helix linker as the primary site of PIP(2) action. Point mutants within this linker in Kv7.2 and Kv7.3 identified a conserved cluster of basic residues that interact with the lipid using electrostatic and hydrogen bonds. Homology modeling of this putative PIP(2)-binding linker in Kv7.2 and Kv7.3 using the solved structure of Kir2.1 and Kir3.1 channels as templates predicts a structure of Kv7.2 and 7.3 very similar to the Kir channels, and to the seven-beta-sheet barrel motif common to other PIP(2)-binding domains. Phosphoinositide-docking simulations predict affinities and interaction energies in accord with the experimental data, and furthermore indicate that the precise identity of residues in the interacting pocket alter channel-PIP(2) interactions not only by altering electrostatic energies, but also by allosterically shifting the structure of the lipid-binding surface. The results are likely to shed light on the general structural mechanisms of phosphoinositide regulation of ion channels.