Multi-PDZ (PSD-95/Discs large/Zonula-occludens-1) domain proteins play a crucial role in the establishment and maintenance of cell polarization. The novel multi-PDZ domain protein FRMPD2 is a potential scaffolding protein consisting of an N-terminal KIND domain, a FERM domain and three PDZ domains. Here we show that FRMPD2 is localized in a polarized fashion in epithelial cells at the basolateral membrane and partially colocalizes with the tight-junction marker protein Zonula-occludens-1. Downregulation of FRMPD2 protein in Caco-2 cells is associated with an impairment of tight junction formation. We find that the FERM domain of FRMPD2 binds phosphatidylinositols and is sufficient for membrane localization. Moreover, we demonstrate that recruitment of FRMPD2 to cell-cell junctions is strictly E-cadherin-dependent, which is in line with our identification of catenin family proteins as binding partners for FRMPD2. We demonstrate that the FERM domain and binding of the PDZ2 domain to the armadillo protein p0071 are required for basolateral restriction of FRMPD2. Moreover, the PDZ2 domain of FRMPD2 is sufficient to partially redirect an apically localized protein to the basolateral membrane. Our results provide novel insights into the molecular function of FRMPD2 and into the targeting mechanism of peripheral membrane proteins in polarized epithelial cells.