During asymmetric cell division, cell fate determinants localize asymmetrically and segregate into one of the two daughter cells. In Drosophila neuroblasts, the asymmetric localization of cell fate determinants to the basal cell cortex requires aPKC. aPKC localizes to the apical cell cortex and phosphorylates the cytoskeletal protein Lethal (2) giant larvae (Lgl). Upon phosphorylation, Lgl dissociates from the cytoskeleton and becomes inactive. Here, we show that phosphorylation regulates Lgl by allowing an autoinhibitory interaction of the N terminus with the C terminus of the protein. We demonstrate that interaction with the cytoskeleton is mediated by a C-terminal domain while the N terminus is not required. Instead, the N terminus can bind to the C terminus and can compete for binding to the cytoskeleton. Interaction between the N- and C-terminal domains requires phosphorylation of Lgl by aPKC. Our results suggest that unphosphorylated, active Lgl exists in an open conformation that interacts with the cytoskeleton while phosphorylation changes the protein to an autoinhibited state.