The Mycobacterium tuberculosis kinase PknB is essential for growth and survival of the pathogen in vitro and in vivo. Here we report the results of our efforts to elucidate the mechanism of regulation of PknB activity. The specific residues in the PknB extracytoplasmic domain that are essential for ligand interaction and survival of the bacterium are identified. The extracytoplasmic domain interacts with mDAP-containing LipidII, and this is abolished upon mutation of the ligand-interacting residues. Abrogation of ligand-binding or sequestration of the ligand leads to aberrant localization of PknB. Contrary to the prevailing hypothesis, abrogation of ligand-binding is linked to activation loop hyperphosphorylation, and indiscriminate hyperphosphorylation of PknB substrates as well as other proteins, ultimately causing loss of homeostasis and cell death. We propose that the ligand-kinase interaction directs the appropriate localization of the kinase, coupled to stringently controlled activation of PknB, and consequently the downstream processes thereof.