The transient receptor potential vanilloid type 1 (TRPV1) channels are involved in both thermosensation and nociception. They are activated by heat, protons, and capsaicin and modulated by a plethora of other agents. This review will focus on the consequences of phospholipase C (PLC) activation, with special emphasis on the effects of phosphatidylinositol 4,5-bisphosphate (PIP2) on these channels. Two opposing effects of PIP2 have been reported on TRPV1. PIP2 has been proposed to inhibit TRPV1, and relief from this inhibition was suggested to be involved in sensitization of these channels by pro-inflammatory agents. In excised patches, however, PIP2 was shown to activate TRPV1. Calcium flowing through TRPV1 activates PLC and the resulting depletion of PIP2 was proposed to play a role in capsaicin-induced desensitization of these channels. We will describe the data indicating involvement of PLC and PIP2 in sensitization and desensitization of TRPV1 and will also discuss other pathways potentially contributing to these two phenomena. We attempt to resolve the seemingly contradictory data by proposing that PIP2 can both activate and inhibit TRPV1 depending on the experimental conditions, more specifically on the level of stimulation of these channels. Finally, we also discuss data in the literature indicating that other TRP channels, TRPA1 and some members of the TRPC subfamily, may also be under a similar dual control by PIP2.