The Nem1-Spo7/Pah1 phosphatase cascade plays an essential role in the synthesis of the neutral lipid triacylglycerol in the yeast Saccharomyces cerevisiae. Pah1 is a phosphatidic acid (PA) phosphatase that is phosphorylated and inactive in the cytoplasm. The Nem1-Spo7 complex is a nuclear/endoplasmic reticulum (ER)-associated protein phosphatase that recruits, dephosphorylates, and activates Pah1. Upon its dephosphorylation, Pah1 hops onto the membrane surface for its interaction with and dephosphorylation of PA to produce the diacylglycerol that is then converted to triacylglycerol. Pah1 then scoots along the membrane to associate with and dephosphorylate another PA molecule. In this work, the Nem1-Spo7 complex was reconstituted into unilamellar phospholipid vesicles (proteoliposomes) composed of phosphatidylcholine, phosphatidylethanolamine, phosphatidylinositol, phosphatidylserine, and PA to mimic the nuclear/ER membrane. The phospholipid composition of the proteoliposomes, which had an average diameter of 60 nm, was confirmed by thin-layer chromatography. The reconstituted Nem1-Spo7 complex supported the recruitment and dephosphorylation of Pah1 phosphorylated by the Pho85-Pho80 protein kinase complex in vitro or the Pah1 phosphorylated by multiple protein kinases in vivo. The Nem1-Spo7-mediated dephosphorylation of Pah1 was dependent on the presence of PA in the proteoliposomes. Additionally, the dephosphorylated Pah1 catalyzed the dephosphorylation of PA to produce diacylglycerol in the proteoliposomes. This reconstituted system permits a defined membrane environment to examine the regulation of the Nem1-Spo7/Pah1 phosphatase cascade.