In Saccharomyces cerevisiae, the rapamycin-sensitive TOR kinases negatively regulate the type 2A-related phosphatase SIT4 by promoting the association of this phosphatase with the inhibitor TAP42. Here, we describe TIP41, a conserved TAP42-interacting protein involved in the regulation of SIT4. Deletion of the TIP41 gene confers rapamycin resistance, suppresses a tap42 mutation, and prevents dissociation of SIT4 from TAP42. Furthermore, a TIP41 deletion prevents SIT4-dependent events such as dephosphorylation of the kinase NPR1 and nuclear translocation of the transcription factor GLN3. Thus, TIP41 negatively regulates the TOR pathway by binding and inhibiting TAP42. The binding of TIP41 to TAP42 is stimulated upon rapamycin treatment via SIT4-dependent dephosphorylation of TIP41, suggesting that TIP41 is part of a feedback loop that rapidly amplifies SIT4 phosphatase activity under TOR-inactivating conditions.