The calcium-activated chloride channel (CaCC) TMEM16A plays crucial roles in regulating neuronal excitability, smooth muscle contraction, fluid secretion and gut motility. While opening of TMEM16A requires binding of intracellular Ca2+, prolonged Ca2+-dependent activation results in channel desensitization or rundown, the mechanism of which is unclear. Here we show that phosphatidylinositol (4,5)-bisphosphate (PIP2) regulates TMEM16A channel activation and desensitization via binding to a putative binding site at the cytosolic interface of transmembrane segments (TMs) 3-5. We further demonstrate that the ion-conducting pore of TMEM16A is constituted of two functionally distinct modules: a Ca2+-binding module formed by TMs 6-8 and a PIP2-binding regulatory module formed by TMs 3-5, which mediate channel activation and desensitization, respectively. PIP2 dissociation from the regulatory module results in ion-conducting pore collapse and subsequent channel desensitization. Our findings thus provide key insights into the mechanistic understanding of TMEM16 channel gating and lipid-dependent regulation.