Phosphatidylinositol-(4,5)-bisphosphate [PtdIns(4,5)P2] is a key regulator of endocytosis. PtdIns(4,5)P2 generation at the plasma membrane in yeast is mediated by the kinase Mss4p, but the mechanism underlying the temporal and spatial activation of Mss4p to increase formation of PtdIns(4,5)P2 at appropriate sites is not known. Here, we show that ADP ribosylation factor (Arf)3p, the yeast homologue of mammalian Arf6, is necessary for wild-type levels of PtdIns(4,5)P2 at the plasma membrane. Arf3p localizes to dynamic spots at the membrane, and the behaviour of these is consistent with it functioning in concert with endocytic machinery. Localization of Arf3p is disrupted by deletion of genes encoding an ArfGAP homology protein Gts1p and a guanine nucleotide exchange factor Yel1p. Significantly, deletion of arf3 causes a reduction in PtdIns(4,5)P2 at the plasma membrane, while increased levels of active Arf3p, caused by deletion of the GTPase-activating protein Gts1, increase PtdIns(4,5)P2 levels. Furthermore, elevated Arf3p correlates with an increase in the number of endocytic sites. Our data provide evidence for a mechanism in yeast to positively regulate plasma membrane production of PtdIns(4,5)P2 levels and that these changes impact on endocytosis.