Lowe syndrome, also known as oculocerebrorenal syndrome, is caused by mutations in the X chromosome-encoded OCRL gene. The OCRL protein is 51% identical to inositol polyphosphate 5-phosphatase II (5-phosphatase II) from human platelets over a span of 744 aa, suggesting that OCRL may be a similar enzyme. We engineered a construct of the OCRL cDNA that encodes amino acids homologous to the platelet 5-phosphatase for expression in baculovirus-infected Sf9 insect cells. This cDNA encodes aa 264-968 of the OCRL protein. The recombinant protein was found to catalyze the reactions also carried out by platelet 5-phosphatase II. Thus OCRL converts inositol 1,4,5-trisphosphate to inositol 1,4-bisphosphate, and it converts inositol 1,3,4,5-tetrakisphosphate to inositol 1,3,4-trisphosphate. Most important, the enzyme converts phosphatidylinositol 4,5-bisphosphate to phosphatidylinositol 4-phosphate. The relative ability of OCRL to catalyze the three reactions is different from that of 5-phosphatase II and from that of another 5-phosphatase isoenzyme from platelets, 5-phosphatase I. The recombinant OCRL protein hydrolyzes the phospholipid substrate 10- to 30-fold better than 5-phosphatase II, and 5-phosphatase I does not cleave the lipid at all. We also show that OCRL functions as a phosphatidylinositol 4,5-bisphosphate 5-phosphatase in OCRL-expressing Sf9 cells. These results suggest that OCRL is mainly a lipid phosphatase that may control cellular levels of a critical metabolite, phosphatidylinositol 4,5-bisphosphate. Deficiency of this enzyme apparently causes the protean manifestations of Lowe syndrome.