Phosphonoacetaldehyde hydrolase (phosphonatase) catalyzes the hydrolysis of phosphonoacetaldehyde to acetaldehyde and inorganic phosphate. In this study, the genes encoding phosphonatase in Bacillus cereus and in Salmonella typhimurium were cloned for high-level expression in Escherichia coli. The kinetic properties of the purified, recombinant phosphonatases were determined. The Schiff base mechanism known to operate in the B. cereus enzyme was verified for the S. typhimurium enzyme by phosphonoacetaldehyde-sodium borohydride-induced inactivation and by site-directed mutagenesis of the catalytic lysine 53. The protein sequence inferred from the B. cereus phosphonatase gene was determined, and this sequence was used along with that from the S. typhimurium phosphonatase gene sequence to search the primary sequence databases for possible structural homologues. We found that phosphonatase belongs to a novel family of hydrolases which appear to use a highly conserved active site aspartate residue in covalent catalysis. On the basis of this finding and the known stereochemical course of phosphonatase-catalyzed hydrolysis at phosphorus (retention), we propose a mechanism which involves Schiff base formation with lysine 53 followed by phosphoryl transfer to aspartate (at position 11 in the S. typhimurium enzyme and position 12 in the B. cereusphosphonatase) and last hydrolysis at the imine C(1) and acyl phosphate phosphorus.