Phosphonates constitute a class of natural products that mimic the properties of the more common organophosphate ester metabolite yet are not readily degraded owing to the direct linkage of the phosphorus atom to the carbon atom. Phosphonate hydrolases have evolved to allow bacteria to utilize environmental phosphonates as a source of carbon and phosphorus. The work reported in this paper examines one such enzyme, phosphonoacetate hydrolase. By using a bioinformatic approach, we circumscribed the biological range of phosphonoacetate hydrolase to a select group of bacterial species from different classes of Proteobacteria. In addition, using gene context, we identified a novel 2-aminoethylphosphonate degradation pathway in which phosphonoacetate hydrolase is a participant. The X-ray structure of phosphonoformate-bound phosphonoacetate hydrolase was determined to reveal that this enzyme is most closely related to nucleotide pyrophosphatase/diesterase, a promiscuous two-zinc ion metalloenzyme of the alkaline phosphatase enzyme superfamily. The X-ray structure and metal ion specificity tests showed that phosphonoacetate hydrolase is also a two-zinc ion metalloenzyme. By using site-directed mutagenesis and (32)P-labeling strategies, the catalytic nucleophile was shown to be Thr64. A structure-guided, site-directed mutation-based inquiry of the catalytic contributions of active site residues identified Lys126 and Lys128 as the most likely candidates for stabilization of the aci-carboxylate dianion leaving group. A catalytic mechanism is proposed which combines Lys12/Lys128 leaving group stabilization with zinc ion activation of the Thr64 nucleophile and the substrate phosphoryl group.