P4-ATPases, also known as phospholipid flippases, are responsible for creating and maintaining transbilayer lipid asymmetry in eukaryotic cell membranes. Here, we use limited proteolysis to investigate the role of the N- and C-termini in ATP hydrolysis and auto-inhibition of the yeast flippase Drs2p/Cdc50p. We show that limited proteolysis of the detergent-solubilized and purified yeast flippase may result in more than one order of magnitude increase of its ATPase activity, which remains dependent on phosphatidylinositol-4-phosphate (PI4P), a regulator of this lipid flippase, and specific to a phosphatidylserine substrate. Using thrombin as the protease, Cdc50p remains intact and in complex with Drs2p, which is cleaved at two positions, namely after R104 and after R1290, resulting in a homogenous sample lacking 104 and 65 residues from its N- and C-termini, respectively. Removal of the 1291-1302 region of the C-terminal extension is critical for relieving the auto-inhibition of full-length Drs2p, while the 1-104 N-terminal residues have an additional but more modest significance for activity. The present results therefore reveal that trimming off appropriate regions of the terminal extensions of Drs2p can greatly increase its ATPase activity in the presence of PI4P, and demonstrate that relief of such auto-inhibition remains compatible with subsequent regulation by PI4P. These experiments suggest that activation of the Drs2p/Cdc50p flippase follows a multi-step mechanism, with preliminary release of a number of constraints, possibly through the binding of regulatory proteins in the trans-Golgi network, followed by full activation by PI4P.