Lipins are evolutionarily conserved phosphatidate phosphatases that perform key functions in phospholipid, triglyceride, and membrane biogenesis. Translocation of lipins on membranes requires their dephosphorylation by the Nem1p-Spo7p transmembrane phosphatase complex through a poorly understood mechanism. Here we identify the carboxy-terminal acidic tail of the yeast lipin Pah1p as an important regulator of this step. Deletion or mutations of the tail disrupt binding of Pah1p to the Nem1p-Spo7p complex and Pah1p membrane translocation. Overexpression of Nem1p-Spo7p drives the recruitment of Pah1p in the vicinity of lipid droplets in an acidic tail-dependent manner and induces lipid droplet biogenesis. Genetic analysis shows that the acidic tail is essential for the Nem1p-Spo7p-dependent activation of Pah1p but not for the function of Pah1p itself once it is dephosphorylated. Loss of the tail disrupts nuclear structure, INO1 gene expression, and triglyceride synthesis. Similar acidic sequences are present in the carboxy-terminal ends of all yeast lipin orthologues. We propose that acidic tail-dependent binding and dephosphorylation of Pah1p by the Nem1p-Spo7p complex is an important determinant of its function in lipid and membrane biogenesis.