Protein phosphatase 2C (PP2C) is a Mn2+- or Mg2+-dependent protein Ser/Thr phosphatase that is essential for regulating cellular stress responses in eukaryotes. The crystal structure of human PP2C reveals a novel protein fold with a catalytic domain composed of a central beta-sandwich that binds two manganese ions, which is surrounded by alpha-helices. Mn2+-bound water molecules at the binuclear metal centre coordinate the phosphate group of the substrate and provide a nucleophile and general acid in the dephosphorylation reaction. Our model presents a framework for understanding not only the classical Mn2+/Mg2+-dependent protein phosphatases but also the sequence-related domains of mitochondrial pyruvate dehydrogenase phosphatase, the Bacillus subtilus phosphatase SpoIIE and a 300-residue domain within yeast adenyl cyclase. The protein architecture and deduced catalytic mechanism are strikingly similar to the PP1, PP2A, PP2B family of protein Ser/Thr phosphatases, with which PP2C shares no sequence similarity, suggestive of convergent evolution of protein Ser/Thr phosphatases.