Phosphoinositides, a family of phosphorylated derivatives of phosphatidylinositol (PtdIns), are tightly regulated both temporally and spatially by PtdIns phosphatases and kinases. Mutations in inositol polyphosphate 5-phosphatase E (INPP5E) cause Joubert syndrome, a human disorder associated with numerous ciliopathic defects, including renal cyst formation, linking phosphoinositides to ciliopathies. However, the molecular mechanism by which INPP5E-mediated PtdIns signaling regulates ciliogenesis and cystogenesis is unclear. Here, we utilized an in vivo vertebrate model of renal cystogenesis to show that Inpp5e enzymatic activity at the apical membrane directs apical docking of basal bodies in renal epithelia. Knockdown or knockout of inpp5e led to ciliogenesis defects and cystic kidneys in zebrafish. Furthermore, knockdown of inpp5e in embryos led to defects in cell polarity, cortical organization of F-actin, and apical segregation of PtdIns(4,5)P and PtdIns(3,4,5)P Knockdown of the ezrin gene, which encodes an ezrin/radixin/moesin (ERM) protein that crosslinks PtdIns(4,5)P and F-actin, phenocopied inpp5e knockdowns. Notably, overexpression of the ezrin gene rescued inpp5e morphants. Finally, treatment with the PI 3-kinase inhibitor LY294002, which decreases PtdIns(3,4,5)P levels, rescued the cellular, phenotypic, and renal functional defects in inpp5e-knockdown embryos. Together, our data indicate that Inpp5e functions as a key regulator of cell polarity in the renal epithelia, by inhibiting PtdIns(3,4,5)P and subsequently stabilizing PtdIns(4,5)P and recruiting Ezrin, F-actin, and basal bodies to the apical membrane, and suggest a possible novel approach for treating human ciliopathies.