In our proteome-wide screen, Ysp2 (also known as Lam2/Ltc4) was identified as a likely physiologically relevant target of the TOR complex 2 (TORC2)-dependent protein kinase Ypk1 in the yeast Saccharomyces cerevisiae. Ysp2 was subsequently shown to be one of a new family of sterol-binding proteins located at plasma membrane (PM)-endoplasmic reticulum (ER) contact sites. Here we document that Ysp2 and its paralogue Lam4/Ltc3 are authentic Ypk1 substrates in vivo and show using genetic and biochemical criteria that Ypk1-mediated phosphorylation inhibits the ability of these proteins to promote retrograde transport of sterols from the PM to the ER. Furthermore, we provide evidence that a change in PM sterol homeostasis promotes cell survival under membrane-perturbing conditions known to activate TORC2-Ypk1 signaling. These observations define the underlying molecular basis of a new regulatory mechanism for cellular response to plasma membrane stress.