Long chain fatty acid esters of coenzyme A (LC-CoA) are potent activators of ATP-sensitive (K(ATP)) channels, and elevated levels have been implicated in the pathophysiology of type 2 diabetes. This stimulatory effect is thought to involve a mechanism similar to phosphatidylinositol 4,5-bisphosphate (PIP2), which activates all known inwardly rectifying potassium (Kir) channels. However, the effect of LC-CoA on other Kir channels has not been well characterized. In this study, we show that in contrast to their stimulatory effect on K(ATP) channels, LC-CoA (e.g. oleoyl-CoA) potently and reversibly inhibits all other Kir channels tested (Kir1.1, Kir2.1, Kir3.4, Kir7.1). We also demonstrate that the inhibitory potency of the LC-CoA increases with the chain length of the fatty acid chain, while both its activatory and inhibitory effects critically depend on the presence of the 3'-ribose phosphate on the CoA group. Biochemical studies also demonstrate that PIP2 and LC-CoA bind with similar affinity to the C-terminal domains of Kir2.1 and Kir6.2 and that PIP2 binding can be competitively antagonized by LC-CoA, suggesting that the mechanism of LC-CoA inhibition involves displacement of PIP2. Furthermore, we demonstrate that in contrast to its stimulatory effect on K(ATP) channels, phosphatidylinositol 3,4-bisphosphate has an inhibitory effect on Kir1.1 and Kir2.1. These results demonstrate a bi-directional modulation of Kir channel activity by LC-CoA and phosphoinositides and suggest that changes in fatty acid metabolism (e.g. LC-CoA production) could have profound and widespread effects on cellular electrical activity.