Membrane protein structure determination is not only technically challenging but is further complicated by the removal or displacement of lipids, which can result in non-native conformations or a strong preference for certain states at the exclusion of others. This is especially applicable to mechanosensitive channels (MSC’s) that evolved to gate in response to subtle changes in membrane tension transmitted through the lipid bilayer. E. coli MscS, a model bacterial system, is an ancestral member of the large family of MSCs found across all phyla of walled organisms. As a tension sensor, MscS is very sensitive and highly adaptive; it readily opens under super-threshold tension and closes under no tension, but under lower tensions, it slowly inactivates and can only recover when tension is released. However, existing cryo-EM structures do not explain the entire functional gating cycle of open, closed, and inactivated states. A central question in the field has been the assignment of the frequently observed non-conductive conformation to either a closed or inactivated state. Here, we present a 3 Å MscS structure in native nanodiscs obtained with Glyco-DIBMA polymer extraction, eliminating the lipid removal step that is common to all previous structures. Besides the protein in the non-conductive conformation, we observe well-resolved densities of four endogenous phospholipid molecules intercalating between the lipid-facing and pore-lining helices in preferred orientations. Mutations of positively charged residues coordinating these lipids inhibit MscS inactivation, whereas removal of a negative charge near the lipid-filled crevice increases inactivation. The functional data allows us to assign this class of structures to the inactivated state. This structure reveals preserved lipids in their native locations, and the functional effects of their destabilization illustrate a novel inactivation mechanism based on an uncoupling of the peripheral tension-sensing helices from the gate.