Adherens junctions (AJs) and focal adhesion (FA) complexes are necessary for cell migration and morphogenesis, and for the development, growth, and survival of all metazoans. Vinculin is an essential regulator of both AJs and FAs, where it provides links to the actin cytoskeleton. Phosphatidylinositol 4,5-bisphosphate (PIP2) affects the functions of many targets, including vinculin. Here we report the crystal structure of vinculin in complex with PIP2, which revealed that PIP2 binding alters vinculin structure to direct higher-order oligomerization and suggests that PIP2 and F-actin binding to vinculin are mutually permissive. Forced expression of PIP2-binding-deficient mutants of vinculin in vinculin-null mouse embryonic fibroblasts revealed that PIP2 binding is necessary for maintaining optimal FAs, for organization of actin stress fibers, and for cell migration and spreading. Finally, photobleaching experiments indicated that PIP2 binding is required for the control of vinculin dynamics and turnover in FAs. Thus, through oligomerization, PIP2 directs a transient vinculin sequestration at FAs that is necessary for proper FA function.