The metabolism of membrane phosphoinositides is critical for a variety of cellular processes. Phosphatidylinositol-3,5-bisphosphate [PtdIns(3,5)P(2)] controls multiple steps of the intracellular membrane trafficking system in both yeast and mammalian cells. However, other than in neuronal tissues, little is known about the physiological functions of PtdIns(3,5)P(2) in mammals. Here, we provide genetic evidence that type III phosphatidylinositol phosphate kinase (PIPKIII), which produces PtdIns(3,5)P(2), is essential for the functions of polarized epithelial cells. PIPKIII-null mouse embryos die by embryonic day 8.5 because of a failure of the visceral endoderm to supply the epiblast with maternal nutrients. Similarly, although intestine-specific PIPKIII-deficient mice are born, they fail to thrive and eventually die of malnutrition. At the mechanistic level, we show that PIPKIII regulates the trafficking of proteins to a cell's apical membrane domain. Importantly, mice with intestine-specific deletion of PIPKIII exhibit diarrhea and bloody stool, and their gut epithelial layers show inflammation and fibrosis, making our mutants an improved model for inflammatory bowel diseases. In summary, our data demonstrate that PIPKIII is required for the structural and functional integrity of two different types of polarized epithelial cells and suggest that PtdIns(3,5)P(2) metabolism is an unexpected and critical link between membrane trafficking in intestinal epithelial cells and the pathogenesis of inflammatory bowel disease.