Apical secretion from epithelial tubes of the Drosophila embryo is mediated by apical F-actin cables generated by the formin-family protein Diaphanous (Dia). Apical localization and activity of Dia are at the core of restricting F-actin formation to the correct membrane domain. Here we identify the mechanisms that target Dia to the apical surface. PI(4,5)P2 levels at the apical membrane regulate Dia localization in both the MDCK cyst model and in Drosophila tubular epithelia. An N-terminal basic domain of Dia is crucial for apical localization, implying direct binding to PI(4,5)P2. Dia apical targeting also depends on binding to Rho1, which is critical for activation-induced conformational change, as well as physically anchoring Dia to the apical membrane. We demonstrate that binding to Rho1 facilitates interaction with PI(4,5)P2 at the plane of the membrane. Together these cues ensure efficient and distinct restriction of Dia to the apical membrane. DOI:http://dx.doi.org/10.7554/eLife.00666.001.