Mammalian Lst8 interacts with the kinase domain of mTOR and stabilizes its interaction with Raptor regulating cell growth through the mTOR-S6K1 signalling pathway. Fission yeast Wat1, an ortholog of mammalian Lst8 is also an essential component of TOR complex 1 (TORC1) and TOR Complex 2 (TORC2) that control protein kinases essential for metabolic pathways. Here, we show that in response to osmotic stress, the Wat1 protein undergoes hyper-phosphorylation at S116 position. Wat1 interacts with the C-terminal region of Tor1 that also contain kinase domain. Co-immunoprecipitation and molecular modelling studies suggest that Wat1-Tor1 interaction is stabilized by FATC domain of Tor1 protein present at the C-terminal region. We have also demonstrated a physical interaction of Wat1 with Gad8, an AGC family protein kinase that is dependent on phosphorylation of Wat1 at S116 residue. Wat1 phosphorylation is required for the maintenance of vacuolar integrity and sexual differentiation. Collectively, our study reveals Wat1 phosphorylation regulates Gad8 function in a manner dependent on Tor1 interaction.