Membrane-integrated type II phosphatidic acid phosphatases (PAP2s) are important for numerous bacterial to human biological processes, including glucose transport, lipid metabolism, and signaling. Escherichia coli phosphatidylglycerol-phosphate phosphatase B (ecPgpB) catalyzes removing the terminal phosphate group from a lipid carrier, undecaprenyl pyrophosphate, and is essential for transport of many hydrophilic small molecules across the membrane. We determined the crystal structure of ecPgpB at a resolution of 3.2 Å. This structure shares a similar folding topology and a nearly identical active site with soluble PAP2 enzymes. However, the substrate binding mechanism appears to be fundamentally different from that in soluble PAP2 enzymes. In ecPgpB, the potential substrate entrance to the active site is located in a cleft formed by a V-shaped transmembrane helix pair, allowing lateral movement of the lipid substrate entering the active site from the membrane lipid bilayer. Activity assays of point mutations confirmed the importance of the catalytic residues and potential residues involved in phosphate binding. The structure also suggests an induced-fit mechanism for the substrate binding. The 3D structure of ecPgpB serves as a prototype to study eukaryotic PAP2 enzymes, including human glucose-6-phosphatase, a key enzyme in the homeostatic regulation of blood glucose concentrations.T ype II phosphatidic acid phosphatases (PAP2s) are a large family of phosphatases important for lipid metabolism and signaling (1, 2). PAP2 proteins have been found in all life kingdoms from bacteria to mammals. They catalyze dephosphorylation of broad substrates by specifically hydrolyzing phosphoric monoester bonds. Their substrates include variety of phosphorylated carbohydrates, peptides, and lipids. PAP2s are involved in vesicular trafficking, secretion, and endocytosis (e.g., the enzyme phosphatidate phosphatase APP1 in yeast) (3); protein glycosylation [e.g., dolichyl pyrophosphate phosphatase 1 (DOLPP1) in the mouse] (4); energy storage (e.g., triacylglycerol biosynthesis) (5); and stress response (6). In contrast to type I PAP enzymes, which are Mg 2+ -dependent and usually soluble, PAP2 proteins are Mg 2+ -independent, and many of PAP2 enzymes are integral transmembrane (TM) proteins (7). Whereas the soluble branch of PAP2s is called class A nonspecific acid phosphatases (NSAPs) (8), the TM branch of the PAP2 family is also called the lipid phosphatase/phosphotransferase family (2) or lipid phosphate phosphatase family (9). Human glucose-6-phosphatase (G6Pase), the key enzyme in the homeostatic regulation of blood glucose concentrations, belongs to the TM PAP2 subfamily (10). Thus, the TM property is unique to the PAP2 family.In Escherichia coli, undecaprenyl phosphate (C 55 -P), a 55-carbon single-lipid chain phospholipid, serves as a carrier lipid to transfer a variety of phosphate-linked polymers across the periplasmic membrane from the cytosol to the periplasmic space. Recently, the crystal structure of phospho-N-acet...