Type IV P-type ATPases (P4-ATPases) use the energy from ATP to "flip" phospholipid across a lipid bilayer, facilitating membrane trafficking events and maintaining the characteristic plasma membrane phospholipid asymmetry. Preferred translocation substrates for the budding yeast P4-ATPases Dnf1 and Dnf2 include lysophosphatidylcholine, lysophosphatidylethanolamine, derivatives of phosphatidylcholine and phosphatidylethanolamine containing a 7-nitro-2-1,3-benzoxadiazol-4-yl (NBD) group on the sn-2 C6 position, and were presumed to include phosphatidylcholine and phosphatidylethanolamine species with two intact acyl chains. We previously identified several mutations in Dnf1 transmembrane (TM) segments 1 through 4 that greatly enhance recognition and transport of NBD phosphatidylserine (NBD-PS). Here we show that most of these Dnf1 mutants cannot flip diacylated PS to the cytosolic leaflet to establish PS asymmetry. However, mutation of a highly conserved asparagine (Asn-550) in TM3 allowed Dnf1 to restore plasma membrane PS asymmetry in a strain deficient for the P4-ATPase Drs2, the primary PS flippase. Moreover, Dnf1 N550 mutants could replace the Drs2 requirement for growth at low temperature. A screen for additional Dnf1 mutants capable of replacing Drs2 function identified substitutions of TM1 and 2 residues, within a region called the exit gate, that permit recognition of dually acylated PS. These TM1, 2, and 3 residues coordinate with the "proline + 4" residue within TM4 to determine substrate preference at the exit gate. Moreover, residues from Atp8a1, a mammalian ortholog of Drs2, in these positions allow PS recognition by Dnf1. These studies indicate that Dnf1 poorly recognizes diacylated phospholipid and define key substitutions enabling recognition of endogenous PS.