An enzyme activity that catalyzes the hydrolysis of phosphate from the C-2 position of fructose 2,6-bisphosphate has been detected in rat liver cytoplasm. The S0.5 for fructose 2,6-bisphosphate was about 15 microM and the enzyme was inhibited by fructose 6-phosphate (Ki 40 microM) and activated by Pi (KA 1 mM). Fructose 2,6-bisphosphatase activity was purified to homogeneity by specific elution from phosphocellulose with fructose by specific elution from phosphocellulose with fructose 6-phosphate and had an apparent molecular weight of about 100,000, 6-phosphofructo 2-kinase activity copurified with fructose 2,6-bisphosphatase activity at each step of the purification scheme. Incubation of the purified protein with [gamma-32P]ATP and the catalytic subunit of the cAMP-dependent protein kinase resulted in the incorporation of 1 mol of 32P/mol of enzyme subunit (Mr = 50,000). Concomitant with this phosphorylation was an activation of the fructose 2,6-bisphosphatase and an inhibition of the 6-phosphofructo 2-kinase activity. Glucagon addition to isolated hepatocytes also resulted in an inhibition of 6-phosphofructo 2-kinase and activation of fructose 2,6-bisphosphatase measured in cell extracts, suggesting that the hormone regulates the level of fructose 2,6-bisphosphate by affecting both synthesis and degradation of the compound. These findings suggest that this enzyme has both phosphohydrolase and phosphotransferase activities i.e. that it is bifunctional, and that both activities can be regulated by cAMP-dependent phosphorylation.