A large number of ion channels maintain their activity through direct interactions with phosphatidylinositol bisphosphate (PIP2). For such channels, hydrolysis of PIP2 causes current inhibition. It has become controversial whether the inhibitory effects on channel activity represent direct effects of PIP2 hydrolysis or of downstream PKC action. We studied Phospholipase C (PLC)-dependent inhibition of G protein-activated inwardly rectifying K+ (Kir3) channels. By monitoring simultaneously channel activity and PIP2 hydrolysis, we determined that both direct PIP2 depletion and PKC actions contribute to Kir3 current inhibition. We show that the PKC-induced effects strongly depend on PIP2 levels in the membrane. At the same time, we show that PKC destabilizes Kir3/PIP2 interactions and enhances the effects of PIP2 depletion on channel activity. These results demonstrate that PIP2 depletion and PKC-mediated effects reinforce each other and suggest that both of these interdependent mechanisms contribute to Kir3 current inhibition. This mechanistic insight may explain how even minor changes in PIP2 levels can have profound effects on Kir3 activity. We also show that stabilization of Kir3/PIP2 interactions by Gβγ attenuates both PKC and Gq-mediated current inhibition, suggesting that diverse pathways regulate Kir3 activity through modulation of channel interactions with PIP2.