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Four serine/threonine kinases are present in all mycobacteria: PknA, PknB, PknG and PknL. PknA and PknB are essential for growth and replication, PknG regulates metabolism, but little is known about PknL. Inactivation of pknL and adjacent regulator MSMEG_4242 in rough colony M. smegmatis mc2155 produced both smooth and rough colonies. Upon restreaking rough colonies, smooth colonies appeared at a frequency of ~ 1/250. Smooth mutants did not form biofilms, showed increased sliding motility and anomalous lipids on thin-layer chromatography, identified by mass spectrometry as lipooligosaccharides and perhaps also glycopeptidolipids. RNA-seq and Sanger sequencing revealed that all smooth mutants had inactivated lsr2 genes due to mutations and different IS1096 insertions. When complemented with lsr2, the colonies became rough, anomalous lipids disappeared and sliding motility decreased. Smooth mutants showed increased expression of IS1096 transposase TnpA and MSMEG_4727, which encodes a protein similar to PKS5. When MSMEG_4727 was deleted, smooth pknL/MSMEG_4242/lsr2 mutants reverted to rough, formed good biofilms, their motility decreased slightly and their anomalous lipids disappeared. Rough delpknL/del4242 mutants formed poor biofilms and showed decreased, aberrant sliding motility and both phenotypes were complemented with the two deleted genes. Inactivation of lsr2 changes colony morphology from rough to smooth, augments sliding motility and increases expression of MSMEG_4727 and other enzymes synthesizing lipooligosaccharides, apparently preventing biofilm formation. Similar morphological phase changes occur in other mycobacteria, likely reflecting environmental adaptations. PknL and MSMEG_4242 regulate lipid components of the outer cell envelope and their absence selects for lsr2 inactivation. A regulatory, phosphorylation cascade model is proposed.