Perturbations in phosphatidylinositol 3,5-bisphosphate (PtdIns(3,5)P2)-synthesizing enzymes result in enlarged endocytic organelles from yeast to humans, indicating evolutionarily conserved function of PtdIns(3,5)P2 in endosome-related events. This is reinforced by the structural and functional homology of yeast Vac14 and human Vac14 (ArPIKfyve), which activate yeast and mammalian PtdIns(3,5)P2-producing enzymes, Fab1 and PIKfyve, respectively. In yeast, PtdIns(3,5)P2-specific phosphatase, Fig4, in association with Vac14, turns over PtdIns(3,5)P2, but whether such a mechanism operates in mammalian cells and what the identity of mammalian Fig4 may be are unknown. Here we have identified and characterized Sac3, a Sac domain phosphatase, as the Fig4 mammalian counterpart. Endogenous Sac3, a widespread 97-kDa protein, formed a stable ternary complex with ArPIKfyve and PIKfyve. Concordantly, Sac3 cofractionated and colocalized with ArPIKfyve and PIKfyve. The intrinsic Sac3(WT) phosphatase activity preferably hydrolyzed PtdIns(3,5)P2 in vitro, although the other D5-phosphorylated polyphosphoinositides were also substrates. Ablation of endogenous Sac3 by short interfering RNAs elevated PtdIns(3,5)P2 in (32)P-labeled HEK293 cells. Ectopically expressed Sac3(WT) in COS cells colocalized with and dilated EEA1-positive endosomes, consistent with the PtdIns(3,5)P2 requirement in early endosome dynamics. In vitro reconstitution of carrier vesicle formation from donor early endosomes revealed a gain of function upon Sac3 loss, whereas PIKfyve or ArPIKfyve protein depletion produced a loss of function. These data demonstrate a coupling between the machinery for PtdIns(3,5)P2 synthesis and turnover achieved through a physical assembly of PIKfyve, ArPIKfyve, and Sac3. We suggest that the tight regulation in PtdIns(3,5)P2 homeostasis is mechanistically linked to early endosome dynamics in the course of cargo transport.