Drs2p, a yeast type IV P-type ATPase (P4-ATPase), or flippase, couples ATP hydrolysis to phosphatidylserine translocation and the establishment of membrane asymmetry. A previous study has shown that affinity-purified Drs2p, possessing an N-terminal tandem affinity purification tag (TAPN-Drs2), retains ATPase and translocase activity, but Drs2p purified using a C-terminal tag (Drs2-TAPC) was inactive. In this study, we show that the ATPase activity of N-terminally purified Drs2p associates primarily with a proteolyzed form of Drs2p lacking the C-terminal cytosolic tail. Truncation of most of the Drs2p C-terminal tail sequence activates its ATPase activity by ∼4-fold. These observations are consistent with the hypothesis that the C-terminal tail of Drs2p is auto-inhibitory to Drs2p activity. Phosphatidylinositol 4-phosphate (PI(4)P) has been shown to positively regulate Drs2p activity in isolated Golgi membranes through interaction with the C-terminal tail. In proteoliposomes reconstituted with purified, N-terminally TAP-tagged Drs2p, both ATPase and flippase activity were significantly higher in the presence of PI(4)P. In contrast, PI(4)P had no significant effect on the activity of a truncated form of Drs2p, which lacked the C-terminal tail. This work provides the first direct evidence, in a purified system, that a phospholipid flippase is subject to auto-inhibition by its C-terminal tail, which can be relieved by a phosphoinositide to stimulate flippase activity.