Gram-positive bacteria deploy the type VII secretion system (T7SS) to facilitate interactions between eukaryotic and prokaryotic cells. In recent work, we identified the TelC protein from Streptococcus intermedius as a T7SS-exported lipid II phosphatase that mediates interbacterial competition. TelC exerts toxicity in the inner wall zone of Gram-positive bacteria; however, intercellular intoxication of sister cells does not occur because they express the TipC immunity protein. In the present study, we sought to characterize the molecular basis of self-protection by TipC. Using sub-cellular localization and protease protection assays, we show that TipC is a membrane protein with an N-terminal transmembrane segment and a C-terminal TelC-inhibitory domain that protrudes into the inner wall zone. The 1.9-Å X-ray crystal structure of a non-protective TipC paralogue reveals that the soluble domain of TipC proteins adopts a crescent-shaped fold that is composed of three α-helices and a seven-stranded β-sheet. Subsequent homology-guided mutagenesis demonstrates that a concave surface formed by the predicted β-sheet of TipC is required for both its interaction with TelC and its TelC-inhibitory activity. S. intermedius cells lacking the tipC gene are susceptible to growth inhibition by TelC delivered between cells; however, we find that the growth of this strain is unaffected by endogenous or overexpressed TelC, although the toxin accumulates in culture supernatants. Together, these data indicate that the TelC-inhibitory activity of TipC is only required for intercellularly transferred TelC and that the T7SS apparatus transports TelC across the cell envelope in a single step, bypassing the cellular compartment in which it exerts toxicity en route.