PTPL1 is the largest known cytoplasmic protein tyrosine phosphatase (PTP) containing a FERM (four point-1, ezrin, radixin and moesin) domain. Enzyme localization and PTP-substrate specificity are thought to play crucial roles in the regulation of PTP activity, which determines their functions. Here we report that PTPL1 is predominantly localized at the apical face of plasma membrane enriched in dorsal microvilli when expressed in HeLa cells. By comparing localization of the full-length enzyme with its FERM domain or FERM-deleted PTPL1 construct, we first concluded that PTPL1-FERM domain is necessary and sufficient to address the wild-type enzyme at the membrane. Two potential phosphatidylinositol 4,5-biphosphate [PtdIns(4,5)P2]-binding motifs were identified within the PTPL1-FERM sequence. We further showed that mutation of both sites altered PTPL1 localization similarly to FERM domain deletion, and impaired its subcellular distribution as confirmed biochemically by cell-fractionation experiments. Using protein-lipid overlays, we demonstrated an interaction of the FERM domain of PTPL1 with PtdIns(4,5)P2, which was lost after mutation of potential PtdIns(4,5)P2-binding motifs. Moreover, neomycin, which masks PtdIns(4,5)P2 polar heads, was shown to decrease by 50% the association of PTPL1 with the cytoskeletal fraction. These results identify the crucial role of the FERM domain in PTPL1 intracellular targeting and demonstrate that localization of PTPL1 is regulated by phosphoinositide metabolism.