The DPP1-encoded diacylglycerol pyrophosphate (DGPP) phosphatase enzyme accounts for half of the Mg2+-independent phosphatidate (PA) phosphatase activity in Saccharomyces cerevisiae. The LPP1 (lipid phosphate phosphatase) gene encodes a protein that contains a novel phosphatase sequence motif found in DGPP phosphatase and in the mouse Mg2+-independent PA phosphatase. A genomic copy of the S. cerevisiae LPP1 gene was isolated and was used to construct lpp1Delta and lpp1Delta dpp1Delta mutants. A multicopy plasmid containing the LPP1 gene directed a 12.9-fold overexpression of Mg2+-independent PA phosphatase activity in the S. cerevisiae lpp1Delta dpp1Delta double mutant. The heterologous expression of the S. cerevisiae LPP1 gene in Sf-9 insect cells resulted in a 715-fold overexpression of Mg2+-independent PA phosphatase activity relative to control insect cells. The Mg2+-independent PA phosphatase activity encoded by the LPP1 gene was associated with the membrane fraction of the cell. The LPP1 gene product also exhibited lyso-PA phosphatase and DGPP phosphatase activities. The order of substrate preference was PA > lyso-PA > DGPP. Like the dpp1Delta mutant, the lpp1Delta mutant and the lpp1Delta dpp1Delta double mutant were viable and did not exhibit obvious growth defects. Biochemical analyses of lpp1Delta, dpp1Delta, and lpp1Delta dpp1Delta mutants showed that the LPP1 and DPP1 gene products encoded nearly all of the Mg2+-independent PA phosphatase and lyso-PA phosphatase activities and all of the DGPP phosphatase activity in S. cerevisiae. Moreover, the analyses of the mutants showed that the LPP1 and DPP1 gene products played a role in the regulation of phospholipid metabolism and the cellular levels of phosphatidylinositol and PA.