Yeast phosphatidylinositol transfer protein (Sec14p) is required for the production of secretory vesicles from the Golgi. This requirement can be relieved by inactivation of the cytosine 5’-diphosphate (CDP)-choline pathway for phosphatidylcholine biosynthesis, indicating that Sec14p is an essential component of a regulatory pathway linking phospholipid metabolism with vesicle trafficking (the Sec14p pathway(1-6)). Sac1p (refs 7 and 8) is an integral membrane protein related to inositol-5-phosphatases such as synaptojanin(9), a protein found in rat brain, Here we show that defects in Sac1p also relieve the requirement for Sec14p by altering phospholipid metabolism so as to expand the pool of diacylglycerol (DAG) in the Golgi. Moreover, although short-chain DAG improves secretory function in strains with a temperature-sensitive Sec14p, expression of diacylglycerol kinase from Escherichia call further impairs it. The essential function of Sec14p may therefore be to maintain a sufficient pool of DAG in the Golgi to support the production of secretory vesicles.