The controlled export of solutes is crucial for cellular adaptation to hypotonic conditions. In the yeast Saccharomyces cerevisiae glycerol export is mediated by Fps1p, a member of the major intrinsic protein (MIP) family of channel proteins. Here we describe a short regulatory domain that restricts glycerol transport through Fps1p. This domain is required for retention of cellular glycerol under hypertonic stress and hence acquisition of osmotolerance. It is located in the N-terminal cytoplasmic extension close to the first transmembrane domain. Several residues within that domain and its precise position are critical for channel control while the proximal residues 13-215 of the N-terminal extension are not required. The sequence of the regulatory domain and its position are perfectly conserved in orthologs from other yeast species. The regulatory domain has an amphiphilic character, and structural predictions indicate that it could fold back into the membrane bilayer. Remarkably, this domain has structural similarity to the channel forming loops B and E of Fps1p and other glycerol facilitators. Intragenic second-site suppressor mutations of the sensitivity to high osmolarity conferred by truncation of the regulatory domain caused diminished glycerol transport, confirming that elevated channel activity is the cause of the osmosensitive phenotype.