Sprouty (Spry) proteins have been revealed as inhibitors of the Ras/mitogen-activated protein kinase (MAPK) cascade, a pathway crucial for developmental processes initiated by activation of various receptor tyrosine kinases. In COS-1 and Swiss 3T3 cells, all Spry isoforms translocate to the plasma membrane, notably ruffles, following activation. Here we show that microinjection of active Rac induced the translocation of Spry isoforms, indicating that the target of the Spry translocation domain (SpryTD) is downstream of active Rac. Targeted disruption of actin polymerization revealed that the SpryTD target appeared upstream of cytoskeletal rearrangements. Accumulated evidence indicated that phosphatidylinositol 4,5-bisphosphate [PtdIns(4,5)P(2)] is the likely SpryTD target. Human Spry2TD (hSpry2TD) binds to PtdIns(4,5)P(2) in vesicle-binding assays. hSpry2TD colocalizes with the pleckstrin homology domain of phospholipase Cdelta, which binds PtdIns(4,5)P(2). The plasma membrane localization of hSpry2TD was abolished in ionomycin-treated MDCK cells or when PtdIns(4,5)P(2) was specifically dephosphorylated by overexpression of an engineered, green fluorescent protein-tagged inositol 5-phosphatase. Similarly, Spred, a novel Ras/MAPK inhibitor recently found to contain the conserved cysteine-rich SpryTD, also translocated to peripheral membranes and bound to PtdIns(4,5)P(2). Alignment of the Spry and Spred proteins led us to identify a translocation-defective point mutant, hSpry2 D252. Targeting of hSpry2 to PtdIns(4,5)P(2) was shown to be essential for the down-regulation of Ras/MAPK signaling.