The physiological importance of polyphosphoinositides (PPI), and especially phosphatidylinositol 4,5-bisphosphate (PIP2), has been documented in numerous reports. As large number of proteins bind PIP2 but much more is known about the biochemical interactions between PIP2 and purified proteins in vitro than about the mechanisms of dynamic local regulation of PIP2-protein interactions inside a cell. A major challenge in understanding how PIP2 function in vivo is to define its physical state and lateral organization in cell membranes. In this dissertation, the hypothesis that PIP2 forms nano-sized clusters in the presence of intracellular divalent cations by electrostatic interactions was examined in model membranes with or without cholesterol-mediated phase segregation. After defining the conditions under which PIP2 alters its distribution in lipid bilayers under the influence of divalent counterions or cholesterol-dependent phase transitions, additional studies show how such membrane reorganization alters the effects of PIP2 on the target proteins gelsolin and DrrA. Comparison between experimental and numerical phase diagrams suggests that a simplified electrostatic model can predict Ca2+-driven formation of PIP2 clusters, but cannot account for the difference between Ca2+ and Mg2+ in condensing PIP2-containing membranes. Differences among Ca2+, Mg2+ and multivalent polyamines in membrane condensing were revealed experimentally and related to differences in their dehydration enthalpies. Ca2+-induced perturbation of PPI-protein interactions was assayed by monolayer insertion studies using a PI(4)P-binding protein, DrrA. Taking advantage of its unique biphasic effect on monolayer surface pressure, in which specific insertion can be isolated from non-specific adsorption, we show that Ca2+ suppresses the specific insertion of DrrA in a concentration-dependent manner. The perturbation of PIP2-protein interactions induced by cholesterol-mediated phase segregation was probed by measuring the inhibition of gelsolin's actin filament severing activity by PIP2-containing vesicles. Cholesterol-mediated phase segregation enhances the inhibition of gelsolin by PIP2, and this effect correlates with changes in membrane ordering. This result suggests that PIP2-protein interaction depends not only on global PIP2 concentrations but also on PIP2 lateral distribution without changes in lipid synthesis/degradation. The results of this work shed light on the links between PIP2 signaling and dynamic local response at the cell membrane/cytoskeletal interface.