CDP-diglyceride, an obligatory intermediate in the biosynthesis of the glycerophospholipids in Escherichia coli, is cleaved in vitro to phosphatidic acid and CMP by a membrane-bound hydrolase. Previous work from our laboratory (Bulawa, C.E., Hermes, J.D., and Raetz, C. R. H. (1983) J. Biol. Chem. 258, 14974-14980) has demonstrated that this enzyme also catalyzes the transfer of CMP from CDP-diglyceride to phosphate and numerous phosphomonoesters. We now report the isolation of E. coli mutants which are defective in CDP-diglyceride hydrolase. These mutations, designated cdh, map at minute 88 between pfkA and tpi. This information permitted the identification of a ColE1 hybrid plasmid, pLC16-4, which causes the overproduction of hydrolase activity. The isolation of deletion and Tn10 insertion mutants at cdh suggests that the hydrolase is nonessential for cell growth. Hydrolase mutants are defective in both CDP-diglyceride hydrolysis and CDP-diglyceride-dependent cytidylylation, indicating that both activities are encoded by the cdh gene. Although previously described as a ribospecific enzyme, we have found that incubation of the partially purified hydrolase with [alpha-32P]dCDP-diglyceride and phosphate yields two products, [32P]dCMP and [alpha-32P]dCDP. That a single enzyme utilizes both CDP- and dCDP-diglyceride is demonstrated by the following. (i) The hydrolysis of [alpha-32P]CDP-diglyceride is inhibited by nonradioactive dCDP-diglyceride and vice versa. (ii) Utilization of both liponucleotides is inhibited by AMP. (iii) Mutants in the cdh gene are defective in both CDP- and dCDP-diglyceride hydrolysis, while cdh clones overproduce both activities. (iv) Hydrolase mutants accumulate both CDP- and dCDP-diglyceride.