Glycerophosphoinositol (GroPIns) is a major inositol phosphate in many cell types. In this study we have determined the optimal conditions (pH 8.0 and 0.5 mM MnCl2) for the metabolism of this molecule in an extract from human placenta, and we show that the major product is inositol (1)-phosphate (Ins(1)P). The enzyme activity that catalyzes this reaction is contained in the same protein designated previously as inositol-(1,2)-cyclic-phosphate 2-inositolphosphohydrolase (cyclic hydrolase), a phosphodiesterase that catalyzes the conversion of inositol-(1,2)-cyclic phosphate (cIns(1,2)P) to Ins(1)P. In addition, the enzyme also catalyzes the production of Ins(1)P from inositol (1)-methylphosphate. All of these substrates, (cIns(1,2)P, GroPIns, and inositol (1)-methylphosphate), contain a phosphodiester bond at the 1-position of the inositol ring. Additional phosphate groups on the 4- or 5-positions of the inositol ring prevent hydrolysis by cyclic hydrolase. The Km of the enzyme for GroPIns is 0.67 mM, and the Vm is 5 mumol/min/mg of protein. GroPIns competitively inhibits cIns(1,2)P hydrolysis with a Ki equal to its Km as a substrate. Hydrolysis of GroPIns and cIns(1,2)P is stimulated by MnCl2, phosphatidylserine, and [ethylenebis(oxyethylenenitrilo)]tetraacetic acid (EGTA). However, whereas cIns(1,2)P hydrolysis is increased 5-8-fold by phosphatidylserine and EGTA only a 2-fold increase of GroPIns hydrolysis occurs under the same conditions. Hydrolysis of both GroPIns and cIns(1,2)P is inhibited by Ins(2)P; the ID50 values are 12 and 1 microM, respectively. There are significant quantities of GroPIns and Ins(2)P in 3T3 cells, indicating that these compounds that alter cIns(1,2)P hydrolase activity may modulate intracellular levels of cIns(1,2)P. Finally, we present evidence suggesting that the substrate specificity of this enzyme is altered during cell transformation.