Recent studies indicate that the metabolism of diacylglycerol pyrophosphate (DGPP) is involved in a novel lipid signaling pathway. DGPP phosphatases (DGPP phosphohydrolase) from Saccharomyces cerevisiae and Escherichia coli catalyze the dephosphorylation of DGPP to yield phosphatidate (PA) and then catalyze the dephosphorylation of PA to yield diacylglycerol. We demonstrated that the Mg2+-independent form of PA phosphatase (PA phosphohydrolase, PAP2) purified from rat liver catalyzed the dephosphorylation of DGPP. This reaction was Mg2+-independent, insensitive to inhibition by N-ethylmaleimide and bromoenol lactone, and inhibited by Mn2+ ions. PAP2 exhibited a high affinity for DGPP (Km = 0.04 mol %). The specificity constant (Vmax/Km) for DGPP was 1. 3-fold higher than that of PA. DGPP inhibited the ability of PAP2 to dephosphorylate PA, and PA inhibited the dephosphorylation of DGPP. Like rat liver PAP2, the Mg2+-independent PA phosphatase activity of DGPP phosphatase purified from S. cerevisiae was inhibited by lyso-PA, sphingosine 1-phosphate, and ceramide 1-phosphate. Mouse PAP2 showed homology to DGPP phosphatases from S. cerevisiae and E. coli, especially in localized regions that constitute a novel phosphatase sequence motif. Collectively, our work indicated that rat liver PAP2 is a member of a phosphatase family that includes DGPP phosphatases from S. cerevisiae and E. coli. We propose a model in which the phosphatase activities of rat liver PAP2 and the DGPP phosphatase of S. cerevisiae regulate the cellular levels of DGPP, PA, and diacylglycerol.