Diphosphoinositol pentakisphosphate (PP-InsP5 or 'InsP7') and bisdiphosphoinositol tetrakisphosphate ([PP]2-InsP4 or 'InsP8') are the most highly phosphorylated members of the inositol-based cell signaling family. We have purified a rat hepatic diphosphoinositol polyphosphate phosphohydrolase (DIPP) that cleaves a beta-phosphate from the diphosphate groups in PP-InsP5 (Km = 340 nM) and [PP]2-InsP4 (Km = 34 nM). Inositol hexakisphophate (InsP6) was not a substrate, but it inhibited metabolism of both [PP]2-InsP4 and PP-InsP5 (IC50 = 0.2 and 3 microM, respectively). Microsequencing of DIPP revealed a 'MutT' domain, which in other contexts guards cellular integrity by dephosphorylating 8-oxo-dGTP, which causes AT to CG transversion mutations. The MutT domain also metabolizes some nucleoside phosphates that may play roles in signal transduction. The rat DIPP MutT domain is conserved in a novel recombinant human uterine DIPP. The nucleotide sequence of the human DIPP cDNA was aligned to chromosome 6; the candidate gene contains at least four exons. The dependence of DIPP's catalytic activity upon its MutT domain was confirmed by mutagenesis of a conserved glutamate residue. DIPP's low molecular size, Mg2+ dependency and catalytic preference for phosphoanhydride bonds are also features of other MutT-type proteins. Because overlapping substrate specificity is a feature of this class of proteins, our data provide new directions for future studies of higher inositol phosphates.