Clathrin-mediated endocytosis (CME) is vital for the internalization of most cell-surface proteins. In CME, plasma membrane-binding clathrin adaptors recruit and polymerize clathrin to form clathrin-coated pits into which cargo is sorted. Assembly polypeptide 2 (AP2) is the most abundant adaptor and is pivotal to CME. Here, we determined a structure of AP2 that includes the clathrin-binding β2 hinge and developed an AP2-dependent budding assay. Our findings suggest that an autoinhibitory mechanism prevents clathrin recruitment by cytosolic AP2. A large-scale conformational change driven by the plasma membrane phosphoinositide phosphatidylinositol 4,5-bisphosphate and cargo relieves this autoinhibition, triggering clathrin recruitment and hence clathrin-coated bud formation. This molecular switching mechanism can couple AP2's membrane recruitment to its key functions of cargo and clathrin binding.