Cells regulate the biophysical properties of their membranes by coordinated synthesis of different classes of lipids. Here, we identified a highly dynamic feedback mechanism by which the budding yeast Saccharomyces cerevisiae can regulate phospholipid biosynthesis. Phosphatidic acid on the endoplasmic reticulum directly bound to the soluble transcriptional repressor Opi1p to maintain it as inactive outside the nucleus. After the addition of the lipid precursor inositol, this phosphatidic acid was rapidly consumed, releasing Opi1p from the endoplasmic reticulum and allowing its nuclear translocation and repression of target genes. Thus, phosphatidic acid appears to be both an essential ubiquitous metabolic intermediate and a signaling lipid.