CDP-diacylglycerol synthase (CDS) is an enzyme required for the regeneration of the signalling molecule phosphatidylinositol-4,5-bisphosphate (PtdlnsP(2)) from phosphatidic acid. A photoreceptor cell-specific isoform of CDS from Drosophila is a key regulator of phototransduction, a G-protein-coupled signalling cascade mediated by phospholipase C, cds mutants cannot sustain a light-activated current as a result of depletion of PtdlnsP(2). Overexpression of CDS increases the amplitude of the light response, demonstrating that availability of PtdlnsP(2) is a determinant in the gain of this pathway. cds mutants undergo light-dependent retinal degeneration which can be suppressed by a mutation in phospholipase C. Thus, enzymes involved in PtdlnsP(2) metabolism regulate phosphoinositide-mediated signalling cascades in vivo.