The prototypical Transient Receptor Potential (TRP) channel is the major light-sensitive, and Ca2+ permeable channel in Drosophila's microvillar photoreceptors. TRP channels are activated following hydrolysis of phosphatidyl-inositol 4,5 bisphosphate (PIP2) by the key effector enzyme phospholipase C (PLC). Mutants lacking TRP channels undergo light-dependent retinal degeneration, as a consequence of the reduced Ca2+ influx. It has been proposed that degeneration is caused by defects in the Ca2+ dependent visual pigment cycle, which result in accumulation of toxic phosphorylated metarhodopsin-arrestin complexes (MPP-Arr2). Here we show that two interventions, which prevent accumulation of MPP-Arr2, namely rearing under red light or eliminating the C-terminal rhodopsin phosphorylation sites, both failed to rescue degeneration in trp mutants. Instead degeneration in trp mutants reared under red light was rescued by mutation of PLC. Degeneration correlated closely with the light-induced depletion of PIP2 that occurs in trp mutants due to failure of Ca2+ dependent inhibition of PLC. Severe retinal degeneration was also induced in the dark in otherwise wild-type flies by overexpression of a bacterial PIP2 4′-phosphatase (SigD) to deplete PIP2. In degenerating trp photoreceptors, phosphorylated Moesin, a PIP2-regulated membrane-cytoskeleton linker essential for normal microvillar morphology, delocalizes from the rhabdomere and there is extensive microvillar actin depolymerization. The results suggest the compromised light-induced Ca2+ influx due to loss of TRP channels leads to PIP2 depletion, resulting in dephosphorylation of Moesin, actin depolymerization and disintegration of photoreceptor structure.