We provided genetic and biochemical evidence that supported the conclusion that the product of pgpB gene of Escherichia coli exhibited diacylglycerol pyrophosphate (DGPP) phosphatase activity. DGPP phosphatase activity was absent in pgpB mutant cells and was expressed at high levels in cells carrying the wild-type pgpB gene on a runaway replication plasmid. The pgpB mutant has been primarily characterized by a defect in phosphatidate (PA) phosphatase activity and also exhibits defects in lyso-PA phosphatase and phosphatidylglycerophosphate phosphatase activities. The defective PA phosphatase in the pgpB mutant was shown to be a Mg2+-independent PA phosphatase activity of the DGPP phosphatase enzyme. We characterized DGPP phosphatase activity in membranes from cells overproducing the pgpB gene product. DGPP phosphatase catalyzed the dephosphorylation of the beta phosphate of DGPP to form PA followed by the dephosphorylation of PA to form diacylglycerol. The specificity constant (Vmax/Km) for DGPP was 9.3-fold greater than that for PA. The pH optimum for the DGPP phosphatase reaction was 6. 5. Activity was independent of a divalent cation requirement, was potently inhibited by Mn2+ ions, and was insensitive to inhibition by N-ethylmaleimide. Pure DGPP phosphatase from Saccharomyces cerevisiae was shown to be similar to the E. coli DGPP phosphatase in its ability to utilize lyso-PA and phosphatidylglycerophosphate as substrates in vitro.