Phosphatidate phosphohydrolase (EC 3.1.3.4) activity can be found in late gestational human amniotic fluid and is thought to originate in type II alveolar cells of the fetal lungs where it plays an important role in lung surfactant synthesis. In the present study, phosphatidate phosphohydrolase activity was detected and characterized in a 105 000 X g pellet of amniotic fluid using either [32P]phosphatidate or a water-soluble analog, 1-O-hexadecyl-rac-[2-(3)H]glycerol 3-phosphate as substrate. With either substrate, enzyme activity was optimal at pH 6.0. The soluble analog was hydrolyzed with a Km value of 163 micrometer and a V of 30 nmole/min per mg of protein, and offered several advantages over phosphatidate as a substrate for assaying phosphatidate phosphohydrolase in amniotic fluid. Using the synthetic analog, phosphatidate phosphohydrolase activity was measured in the 700 X g supernatant fraction of 30 human amniocentesis samples and compared with another index of fetal lung maturity, the phosphatidylcholine/sphingomyelin ratio. The results suggest that the new phosphohydrolase assay may be clinically useful in the assessment of fetal lung development.