Chloride is the major free anion in the extracellular space (>100 mM) and within the cytoplasm in eukaryotes (10 ∼ 20 mM). Cytoplasmic Cl- level is dynamically regulated by Cl- channels and transporters. It is well established that movement of Cl- across the cell membrane is coupled with cell excitability through changes in membrane potential and with water secretion. However, whether cytoplasmic Cl- plays additional roles in animal development and tissue homeostasis is unknown. Here we use genetics, cell biological and pharmacological tools to demonstrate that TMEM16A, an evolutionarily conserved calcium-activated chloride channel (CaCC), regulates cytoplasmic Cl- homeostasis and promotes plasma membrane remodeling required for mammalian epithelial morphogenesis. We demonstrate that TMEM16A-mediated control of cytoplasmic Cl- regulates the organization of the major phosphoinositide species PtdIns(4,5)P2 into microdomains on the plasma membrane, analogous to processes that cluster soluble and membrane proteins into phase-separated droplets. We further show that an adequate cytoplasmic Cl- level is required for proper endocytic trafficking and membrane supply during early stages of ciliogenesis and adherens junction remodeling. Our study thus uncovers a critical function of CaCC-mediated cytoplasmic Cl- homeostasis in controlling the organization of PtdIns(4,5)P2 microdomains and membrane remodeling. This newly defined role of cytoplasmic Cl- may shed light on the mechanisms of intracellular Cl- signaling events crucial for regulating tissue architecture and organelle biogenesis during animal development.