Although the inositol phosphatase SHIP-1 is generally thought to inhibit signaling for Fc receptor-mediated phagocytosis, the product of its activity, phosphatidylinositol 3,4 bisphosphate (PI(3,4)P(2)), has been implicated in activation of the NADPH oxidase. This suggests that SHIP-1 positively regulates the generation of reactive oxygen species after phagocytosis. To examine how SHIP-1 activity contributes to Fc receptor-mediated phagocytosis, we measured and compared phospholipid dynamics, membrane trafficking, and the oxidative burst in macrophages from SHIP-1-deficient and wild-type mice. SHIP-1-deficient macrophages showed significantly elevated ratios of PI(3,4,5)P(3) to PI(3,4)P(2) on phagosomal membranes. Imaging reactive oxygen intermediate activities in phagosomes revealed decreased early NADPH oxidase activity in SHIP-1-deficient macrophages. SHIP-1 deficiency also altered later stages of phagosome maturation, as indicated by the persistent elevation of PI(3)P and the early localization of Rab5a to phagosomes. These direct measurements of individual organelles indicate that phagosomal SHIP-1 enhances the early oxidative burst through localized alteration of the membrane 3'-phosphoinositide composition.