Sequence analysis of Saccharomyces cerevisiae chromosome IX identified a 946 amino acid open reading frame (YIL002C), designated here as INP51, that has carboxyl- and amino-terminal regions similar to mammalian inositol polyphosphate 5-phosphatases and to yeast SAC1. This two-domain primary structure resembles the mammalian 5-phosphatase, synaptojanin. We report that Inp51p is associated with a particulate fraction and that recombinant Inp51p exhibits intrinsic phosphatidylinositol 4,5-bisphosphate 5-phosphatase activity. Deletion of INP51 (inp51) results in a "cold-tolerant" phenotype, enabling significantly faster growth at temperatures below 15 degreesC as compared with a parental strain. Complementation analysis of an inp51 mutant strain demonstrates that the cold tolerance is strictly due to loss of 5-phosphatase catalytic activity. Furthermore, deletion of PLC1 in an inp51 mutant does not abrogate cold tolerance, indicating that Plc1p-mediated production of soluble inositol phosphates is not required. Cells lacking INP51 have a 2-4-fold increase in levels of phosphatidylinositol 4,5-bisphosphate and inositol 1,4, 5-trisphosphate, whereas cells overexpressing Inp51p exhibit a 35% decrease in levels of phosphatidylinositol 4,5-bisphosphate. We conclude that INP51 function is critical for proper phosphatidylinositol 4,5-bisphosphate homeostasis. In addition, we define a novel role for a 5-phosphatase loss of function mutant that improves the growth of cells at colder temperatures without alteration of growth at normal temperatures, which may have useful commercial applications.