Both lipid and ion translocation by Ca2+-regulated TMEM16 transmembrane proteins utilizes a membrane-exposed hydrophilic groove. Several conformations of the groove are observed in TMEM16 protein structures, but how these conformations form, and what functions they support, remains unknown. From analyses of atomistic molecular dynamics simulations of Ca2+-bound nhTMEM16 we find that the mechanism of a conformational transition of the groove from membrane-exposed to occluded from the membrane involves the repositioning of transmembrane helix 4 (TM4) following its disengagement from a TM3/TM4 interaction interface. Residue L302 is a key element in the hydrophobic TM3/TM4 interaction patch that braces the open-groove conformation, which should be changed by an L302A mutation. The structure of the L302A mutant determined by cryogenic electron microscopy (cryo-EM) reveals a partially closed groove that could translocate ions, but not lipids. This is corroborated with functional assays showing severely impaired lipid scrambling, but robust channel activity by L302A.