Cofilin/ADF is a ubiquitous actin-binding protein that is important for rapid actin dynamics in vivo. The long alpha-helix (helix 3 in yeast cofilin) forms the most highly conserved region in cofilin/ADF proteins, and residues in the NH2-terminal half of this alpha-helix have been shown to be essential for actin binding in cofilin/ADF. Recent studies also suggested that the basic residues in the COOH-terminal half of this alpha-helix would play an important role in F-actin binding. In contrast to these studies, we show here that the charged residues in the COOH-terminal half of helix 3 are not important for actin filament binding in yeast cofilin. Mutations in these residues, however, result in a small defect in actin monomer interactions. We also show that yeast cofilin can differentiate between various phosphatidylinositides, and mapped the PI(4,5)P2 binding site by using a collection of cofilin mutants. The PI(4,5)P2 binding site of yeast cofilin is a large positively charged surface that consists of residues in helix 3 as well as residues in other parts of the cofilin molecule. This suggests that cofilin/ADF proteins probably interact simultaneously with more than one PI(4,5)P2 molecule. The PI(4,5)P2-binding site overlaps with areas that are important for F-actin binding, explaining why the actin-related activities of cofilin/ADF are inhibited by PI(4,5)P2. The biological roles of actin and PI(4,5)P2 interactions of cofilin are discussed in light of phenotypes of specific yeast strains carrying mutations in residues that are important for actin and PI(4,5)P2 binding.