Transient Receptor Potential Mucolipin 1 (TRPML1) is a lysosomal cation channel whose loss-of-function mutations directly cause the lysosomal storage disorder mucolipidosis type IV (MLIV). TRPML1 can be allosterically regulated by various ligands including natural lipids and small synthetic molecules and the channel undergoes a global movement propagated from ligand-induced local conformational changes upon activation. In this study, we identified a functionally critical residue, Tyr404, at the C-terminus of the S4 helix, whose mutations to tryptophan and alanine yield gain- and loss-of-function channels, respectively. These allosteric mutations mimic the ligand activation or inhibition of the TRPML1 channel without interfering with ligand binding and both mutant channels are susceptible to agonist or antagonist modulation, making them better targets for screening potent TRPML1 activators and inhibitors. We also determined the high-resolution structure of TRPML1 in complex with the PI(4,5)P2 inhibitor, revealing the structural basis underlying this lipid inhibition. In addition, an endogenous phospholipid likely from sphingomyelin is identified in the PI(4,5)P2-bound TRPML1 structure at the same hotspot for agonists and antagonists, providing a plausible structural explanation for the inhibitory effect of sphingomyelin on agonist activation.