Lithium is used in the clinical treatment of bipolar disorder, a disease where patients suffer mood swings between mania and depression. Although the mode of action of lithium remains elusive, a putative primary target is thought to be inositol monophosphatase (IMPase) activity. Two IMPase genes have been identified in mammals, the well characterized myo-inositol monophosphatase 1 (IMPA1) and myo-inositol monophosphatase 2 (IMPA2). Several lines of genetic evidence have implicated IMPA2 in the pathogenesis of not only bipolar disorder but also schizophrenia and febrile seizures. However, little is known about the protein, although it is predicted to have lithium-inhibitable IMPase activity based on its homology to IMPA1. Here we present the first biochemical study comparing the enzyme activity of IMPA2 to that of IMPA1. We demonstrate that in vivo, IMPA2 forms homodimers but no heterodimers with IMPA1. Recombinant IMPA2 exhibits IMPase activity, although maximal activity requires higher concentrations of magnesium and a higher pH. IMPA2 shows significantly lower activity toward myo-inositol monophosphate than IMPA1. We therefore screened for additional substrates that could be more efficiently dephosphorylated by IMPA2, but failed to find any. Importantly, when using myo-inositol monophosphate as a substrate, the IMPase activity of IMPA2 was inhibited at high lithium and restricted magnesium concentrations. This kinetics distinguishes it from IMPA1. We also observed a characteristic pattern of differential expression between IMPA1 and IMPA2 in a selection of tissues including the brain, small intestine, and kidney. These data suggest that IMPA2 has a separate function in vivo from that of IMPA1.