The rolling blackout (rbo) gene encodes an integral plasma membrane lipase required for Drosophila phototransduction. Photoreceptors are enriched for the RBO protein, and temperature-sensitive rbo mutants show reversible elimination of phototransduction within minutes, demonstrating an acute requirement for the protein. The block is activity dependent, indicating that the action of RBO is use dependent. Conditional rbo mutants show activity-dependent depletion of diacylglycerol and concomitant accumulation of phosphatidylinositol phosphate and phosphatidylinositol 4,5-bisphosphate within minutes of induction, suggesting rapid downregulation of phospholipase C (PLC) activity. The RBO requirement identifies an essential regulatory step in G-protein-coupled, PLC-dependent inositol lipid signaling mediating activation of TRP and TRPL channels during phototransduction.