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ATP-sensitive potassium (KATP) channels, composed of four pore-lining Kir6.2 subunits and four regulatory sulfonylurea receptor 1 (SUR1) subunits, control insulin secretion in pancreatic β-cells. KATP channel opening is stimulated by PIP2 and inhibited by ATP. Mutations that increase channel opening by PIP2 reduce ATP inhibition and cause neonatal diabetes. Although considerable evidence has implicated a role for PIP2 in KATP channel function, previously solved open-channel structures have lacked bound PIP2, and mechanisms by which PIP2 regulates KATP channels remain unresolved. Here, we report the cryoEM structure of a KATP channel harboring the neonatal diabetes mutation Kir6.2-Q52R, in the open conformation, bound to amphipathic molecules consistent with natural C18:0/C20:4 long-chain PI(4,5)P2 at two adjacent binding sites between SUR1 and Kir6.2. The canonical PIP2 binding site is conserved among PIP2-gated Kir channels. The non-canonical PIP2 binding site forms at the interface of Kir6.2 and SUR1. Functional studies demonstrate both binding sites determine channel activity. Kir6.2 pore opening is associated with a twist of the Kir6.2 cytoplasmic domain and a rotation of the N-terminal transmembrane domain of SUR1, which widens the inhibitory ATP binding pocket to disfavor ATP binding. The open conformation is particularly stabilized by the Kir6.2-Q52R residue through cation-π bonding with SUR1-W51. Together, these results uncover the cooperation between SUR1 and Kir6.2 in PIP2 binding and gating, explain the antagonistic regulation of KATP channels by PIP2 and ATP, and provide a putative mechanism by which Kir6.2-Q52R stabilizes an open channel to cause neonatal diabetes.