The PROPPIN family member Atg18 is a phosphoinositide-binding protein that is composed of a seven β-propeller motif and is part of the conserved autophagy machinery. Here, we report that the Atg18 phosphorylation in the loops in the propellar structure of blade 6 and blade 7 decreases its binding affinity to phosphatidylinositol 3,5-bisphosphate in the yeast Pichia pastoris. Dephosphorylation of Atg18 was necessary for its association with the vacuolar membrane and caused septation of the vacuole. Upon or after dissociation from the vacuolar membrane, Atg18 was rephosphorylated, and the vacuoles fused and formed a single rounded structure. Vacuolar dynamics were regulated according to osmotic changes, oxidative stresses, and nutrient conditions inducing micropexophagy via modulation of Atg18 phosphorylation. This study reveals how the phosphoinositide-binding activity of the PROPPIN family protein Atg18 is regulated at the membrane association domain and highlights the importance of such phosphoregulation in coordinated intracellular reorganization.