The Orm family proteins are conserved integral membrane proteins of the endoplasmic reticulum that are key homeostatic regulators of sphingolipid biosynthesis. Orm proteins bind to and inhibit serine:palmitoyl-coenzyme A transferase, the first enzyme in sphingolipid biosynthesis. In Saccharomyces cerevisiae, Orm1 and Orm2 are inactivated by phosphorylation in response to compromised sphingolipid synthesis (e.g., upon addition of inhibitor myriocin), thereby restoring sphingolipid production. We show here that protein kinase Ypk1, one of an essential pair of protein kinases, is responsible for this regulatory modification. Myriocin-induced hyperphosphorylation of Orm1 and Orm2 does not occur in ypk1 cells, and immunopurified Ypk1 phosphorylates Orm1 and Orm2 robustly in vitro exclusively on three residues that are known myriocin-induced sites. Furthermore, the temperature-sensitive growth of ypk1(ts) ypk2 cells is substantially ameliorated by deletion of ORM genes, confirming that a primary physiological role of Ypk1-mediated phosphorylation is to negatively regulate Orm function. Ypk1 immunoprecipitated from myriocin-treated cells displays a higher specific activity for Orm phosphorylation than Ypk1 from untreated cells. To identify the mechanism underlying Ypk1 activation, we systematically tested several candidate factors and found that the target of rapamycin complex 2 (TORC2) kinase plays a key role. In agreement with prior evidence that a TORC2-dependent site in Ypk1(T662) is necessary for cells to exhibit a wild-type level of myriocin resistance, a Ypk1(T662A) mutant displays only weak Orm phosphorylation in vivo and only weak activation in vitro in response to sphingolipid depletion. Additionally, sphingolipid depletion increases phosphorylation of Ypk1 at T662. Thus, Ypk1 is both a sensor and effector of sphingolipid level, and reduction in sphingolipids stimulates Ypk1, at least in part, via TORC2-dependent phosphorylation.