Embryonic cell fate decisions require precise spatial coordination between competing lineage determinants. In the syncytial embryo, primordial germ cells (PGCs) and posterior endoderm are specified at the posterior pole in overlapping domains, creating a conflict between germline and somatic fates. PGC formation depends on germ granules, which locally promote production of the phospholipid PIP2 at the posterior plasma membrane. PIP2 regulates actin dynamics leading to membrane protrusions that generate PGCs. We find that the posterior endoderm determinant, the receptor tyrosine kinase (RTK) Torso, antagonizes germ granule activity by activating phosphoinositide 3-kinase (PI3K) which converts PIP2 to PIP3. PIP3 prevents PGC formation, ensuring endoderm specification. Loss of Torso or PI3K expands the posterior PIP2 domain, increasing both the number and spatial extent of PGCs. Germ granules counteract this activity through production of the E3 ubiquitin ligase Germ cell-less (Gcl), which locally eliminates Torso and prevents PI3K-mediated PIP2 depletion at the posterior pole. In mutants, PIP3 accumulates at the posterior membrane and PGC formation fails, a defect that can be partially rescued by targeted posterior expression of the PIP3 phosphatase Pten. Together, these findings demonstrate that mutual antagonism between germ granules and Torso signaling generates a PIP2/PIP3 boundary in the plasma membrane that governs the earliest germline-soma fate decision. Our work reveals how opposing maternal cues can be integrated at the level of membrane phospholipids to pattern cell fate during the earliest stages of development.