A yeast mutant, cdg1, was isolated on the basis of an inositol excretion phenotype. This mutant exhibited pleiotropic deficiencies in phospholipid biosynthesis, including reduced levels of CDP-diacylglycerol (DAG) synthase activity (Klig, L. S., Homann, M. J., Kohlwein, S. D., Kelley, M. J., Henry, S. A., and Carman, G. M. (1988) J. Bacteriol. 170, 1878-1886). In this study we present evidence that the molecular basis for the inositol excretion phenotype is a G305/A305 point mutation (Cys102 --> Tyr substitution) within the CDS1 gene (encodes CDP-DAG synthase) of this mutant. Expression of CDP-DAG synthase activity from a plasmid-borne copy of the CDS1 gene in the cdg1 mutant was not down-regulated, and this expression also corrected the inositol excretion phenotype. Introduction of the above mutated gene (CDS1*) controlled by its endogenous promoter on a single copy plasmid into a cds1-null background reconstituted a transformant with the cdg1 phenotype, including reduced CDP-DAG synthase activity, elevated phosphatidylserine synthase activity, and inositol excretion into the growth medium. Expression of CDS1* in a single copy in the cdg1 mutant raised CDP-DAG synthase activity from 15 to 30% of derepressed wild-type yeast levels but still did not correct the inositol excretion phenotype. CDP-DAG synthase activity was not regulated in response to precursors of phospholipid biosynthesis in the cdg1 mutant either with or without a trans copy of the CDS1* gene. An open reading frame was identified 5' to the CDS1 locus, YBR0314, which also resulted in inositol excretion when present in trans in multiple copies.