Because the envelope phosphatidate phosphatase plays a pivotal role in chloroplast glycerolipid metabolism, we have analyzed whether diacylglycerol could be a regulatory factor of the enzyme. Using isolated envelope membranes in which the level of diacylglycerol was modified by thermolysin treatment of intact chloroplasts to destroy the galactolipid:galactolipid galactosyltransferase, we have demonstrated that phosphatidate phosphatase activity was reduced when the membrane was enriched in diacylglycerol. All 1,2-diacylglycerol molecular species assayed were demonstrated to inhibit the enzyme to about the same extent. Kinetic studies with envelope from thermolysin-treated chloroplasts were performed in the absence and presence of diacylglycerol, and diacylglycerol was shown to be a powerful competitive inhibitor of the reaction. Finally, using isolated intact spinach chloroplasts, we have demonstrated that in situ phosphatidate phosphatase activity can be modulated by the level of diacylglycerol present in the membrane. The relevance of phosphatidate phosphatase inhibition by diacylglycerol in the regulation of chloroplast glycerolipid biosynthesis is discussed.