Membrane dynamics is necessary for cell homeostasis and signal transduction and is in part regulated by phosphoinositides. Pikfyve/Fab1p is a phosphoinositide kinase that phosphorylates phosphatidylinositol 3-monophosphate into phosphatidylinositol-3,5-bisphosphate [PtdIns(3,5)P2] and is implicated in membrane homeostasis in yeast and in mammalian cells. These two phosphoinositides are substrates of myotubularin phosphatases found mutated in neuromuscular diseases. We studied the roles of phosphatidylinositol phosphate kinase 3 (PPK-3), the orthologue of PIKfyve/Fab1p, in a multicellular organism, Caenorhabditis elegans. Complete loss of ppk-3 function induces developmental defects characterized by embryonic lethality, whereas partial loss of function leads to growth retardation. At the cellular level, ppk-3 mutants display a striking enlargement of vacuoles positive for lysosome-associated membrane protein 1 in different tissues. In the intestine, RAB-7-positive late endosomes are also enlarged. Membranes of the enlarged lysosomes originate at least in part from smaller lysosomes, and functional and genetic analyses show that the terminal maturation of lysosomes is defective. Protein degradation is not affected in the hypomorphic ppk-3 mutant and is thus uncoupled from membrane retrieval. We measured the level of PtdIns(3,5)P2 and showed that its production is impaired in this mutant. This work strongly suggests that the main function of PPK-3 is to mediate membrane retrieval from matured lysosomes through regulation of PtdIns(3,5)P2.