The Saccharomyces cerevisiae PAH1-encoded Mg 2؉ -dependent phosphatidate phosphatase (PAP1, 3-sn-phosphatidate phosphohydrolase, EC 3.1.3.4) catalyzes the dephosphorylation of phosphatidate to yield diacylglycerol and P i . This enzyme plays a major role in the synthesis of triacylglycerols and phospholipids in S. cerevisiae. PAP1 contains the DXDX(T/V) catalytic motif (DIDGT at residues 398 -402) that is shared by the mammalian fat-regulating protein lipin 1 and the superfamily of haloacid dehalogenase-like proteins. The yeast enzyme also contains a conserved glycine residue (Gly 80 ) that is essential for the fat-regulating function of lipin 1 in a mouse model. In this study, we examined the roles of the putative catalytic motif and the conserved glycine for PAP1 activity by a mutational analysis. The PAP1 activities of the D398E and D400E mutant enzymes were reduced by >99.9%, and the activity of the G80R mutant enzyme was reduced by 98%. The mutant PAH1 alleles whose products lacked PAP1 activity were nonfunctional in vivo and failed to complement the pah1⌬ mutant phenotypes of temperature sensitivity, respiratory deficiency, nuclear/endoplasmic reticulum membrane expansion, derepression of INO1 expression, and alterations in lipid composition. These results demonstrated that the PAP1 activity of the PAH1 gene product is essential for its roles in lipid metabolism and cell physiology.The PAH1 gene (previously known as SMP2) in the yeast Saccharomyces cerevisiae encodes Mg 2ϩ -dependent PA 2 phosphatase (PAP1, 3-sn-phosphatidate phosphohydrolase, EC 3.1.3.4) (1). PAP1 catalyzes the dephosphorylation of PA yielding DAG and P i (2). This enzyme generates the DAG used for the synthesis of TAG (1) and may generate the DAG used for the synthesis of PE and PC via the Kennedy pathway ( Fig. 1) (3). PAH1-encoded PAP1 also controls the cellular concentration of its substrate PA (1), which is the precursor for phospholipids that are synthesized via the CDP-DAG pathway (Fig. 1) (4, 5).The activity of the PAH1-encoded PAP1 enzyme is regulated by lipids (6, 7) and nucleotides (8) and by the covalent modification of phosphorylation (9, 10). PAP1 activity is enhanced by CDP-DAG, PI, and cardiolipin (6), whereas activity is inhibited by the sphingoid bases phytosphingosine and sphinganine (7), and by the nucleotides ATP and CTP (8). Pah1p 3 is phosphorylated by cyclin-dependent Cdc28p kinase and dephosphorylated by the Nem1p-Spo7p phosphatase complex (9). A phosphorylation-deficient Pah1p mutant exhibits elevated PAP1 activity (10) indicating that phosphorylation inhibits PAP1 activity. The regulation of PAP1 activity by these factors is thought to be part of a complex mechanism by which cells coordinate the synthesis of phospholipids via the CDP-DAG and Kennedy pathways and the synthesis of TAG (3, 4).PAH1 is a gene whose mutation results in increased plasmid maintenance and causes slow growth, temperature sensitivity, and respiratory deficiency (11). Pah1p is the yeast homolog of the mammalian fat-regulating protein lipin ...