Dynamic positioning of endothelial tip and stalk cells, via the interplay between VEGFR2 and NOTCH signaling, is essential for angiogenesis. VEGFR2 activates PI3K, which phosphorylates PI(4,5)P2 to PI(3,4,5)P3, activating AKT; however, PI3K/AKT does not direct tip cell specification. We report that PI(4,5)P2 hydrolysis by the phosphoinositide-5-phosphatase, INPP5K, contributes to angiogenesis. INPP5K ablation disrupted tip cell specification and impaired embryonic angiogenesis associated with enhanced DLL4/NOTCH signaling. INPP5K degraded a pool of PI(4,5)P2 generated by PIP5K1C phosphorylation of PI(4)P in endothelial cells. INPP5K ablation increased PI(4,5)P2, thereby releasing β-catenin from the plasma membrane, and concurrently increased PI(3,4,5)P3-dependent AKT activation, conditions that licensed DLL4/NOTCH transcription. Suppression of PI(4,5)P2 in INPP5K-siRNA cells by PIP5K1C-siRNA, restored β-catenin membrane localization and normalized AKT signaling. Pharmacological NOTCH or AKT inhibition in vivo or genetic β-catenin attenuation rescued angiogenesis defects in INPP5K-null mice. Therefore, PI(4,5)P2 is critical for β-catenin/DLL4/NOTCH signaling, which governs tip cell specification during angiogenesis.