The gene EPXH2 encodes for the soluble epoxide hydrolase (sEH), an enzyme involved in the regulation of cardiovascular and renal physiology containing two distinct domains connected via a proline-rich linker. The C-terminal domain containing the EH catalytic activity has been well studied. In contrast, a function for the N-terminal domain, which has high homology to the haloacid dehalogenase family of phosphatases, has not been definitively reported. In this study we describe the N-terminal domain as a functional phosphatase unaffected by a number of classic phosphatase inhibitors. Assuming a functional association between these catalytic activities, dihydroxy lipid phosphates were rationalized as potential endogenous substrates. A series of phosphorylated hydroxy lipids were therefore synthesized and found to be excellent substrates for the human sEH. The best substrate tested was the monophosphate of dihydroxy stearic acid (threo-9͞ 10-phosphonoxy-hydroxy-octadecanoic acid) with K m ؍ 21 ؎ 0.3 M, VMax ؍ 338 ؎ 12 nmol⅐min ؊1 ⅐mg ؊1 , and kcat ؍ 0.35 ؎ 0.01 s ؊1 . Therefore dihydroxy lipid phosphates are possible candidates for the endogenous substrates of the sEH N-terminal domain, which would represent a novel branch of fatty acid metabolism with potential signaling functions.T he soluble epoxide hydrolase (sEH), first described in 1972(1), is an ubiquitous enzyme in vertebrates that transforms epoxides to their corresponding diols (2). Although uniformly expressed in the liver, high expression of sEH is highly localized in other tissues including vascular endothelium, some smooth muscle, and the proximal tubule (3, 4). Epoxy fatty acids generated by cytochrome P450 epoxygenases are endogenous substrates for the sEH C-terminal domain (5), with critical roles in the regulation of cardiovascular, renal, and inflammatory biology (6-9). The hydrolysis of epoxy fatty acids modulates their intracellular fate (10, 11) and biological activity (9,12,13). In vivo, the pharmacological blockade of epoxide hydrolysis attenuates hypertension (4, 14), whereas the deletion of this gene reduces blood pressure in male mice to female levels (15).The sEH is a homodimer with a monomeric unit of 62.5 kDa (2) whose primary structure suggests that the EPXH2 gene was produced by the fusion of two primordial dehalogenase genes (16,17). This gene fusion hypothesis was recently supported by a 2.8-Å resolution x-ray crystal structure of the mouse enzyme (18). The C-terminal sEH domain has high homology to haloalkane dehalogenase, whereas the N-terminal domain is similar to haloacid dehalogenase (HAD). Although analysis of the sEH crystal structure revealed that the conserved HAD-like catalytic residues were properly oriented for catalysis, no dehalogenase activity was detected (18). However, the amino-terminal catalytic DXDX(T͞V) motif of HAD has been used to describe an enzyme class that includes numerous phosphatases (19)(20)(21).It can be argued that gene fusion events are driven by evolution, leading to the physical linkage of f...