SAC (for suppressor of actin) domain proteins in yeast and animals have been shown to modulate the levels of phosphoinositides, thereby regulating several cellular activities such as signal transduction, actin cytoskeleton organization, and vesicle trafficking. Nine genes encoding SAC domain-containing proteins are present in the Arabidopsis thaliana genome, but their roles in plant cellular functions and plant growth and development have not been characterized. In this report, we demonstrate the essential roles of one of the Arabidopsis SAC domain proteins, AtSAC1, in plant cellular functions. Mutation of the AtSAC1 gene in the fragile fiber7 (fra7) mutant caused a dramatic decrease in the wall thickness of fiber cells and vessel elements, thus resulting in a weak stem phenotype. The fra7 mutation also led to reduced length and aberrant shapes in fiber cells, pith cells, and trichomes and to an alteration in overall plant architecture. The AtSAC1 gene was found to be expressed in all tissues in elongating organs; however, it showed predominant expression in vascular tissues and fibers in nonelongating parts of stems. In vitro activity assay demonstrated that AtSAC1 exhibited phosphatase activity toward phosphatidylinositol 3,5-biphosphate. Subcellular localization studies showed that AtSAC1 was colocalized with a Golgi marker. Truncation of the C terminus by the fra7 mutation resulted in its localization in the cytoplasm but had no effect on phosphatase activity. Furthermore, examination of the cytoskeleton organization revealed that the fra7 mutation caused the formation of aberrant actin cables in elongating cells but had no effect on the organization of cortical microtubules. Together, these results provide genetic evidence that AtSAC1, a SAC domain phosphoinositide phosphatase, is required for normal cell morphogenesis, cell wall synthesis, and actin organization.