Diacylglycerol pyrophosphate (DGPP) phosphatase, encoded by the DPP1 gene, is a membrane-associated enzyme in the yeast Saccharomyces cerevisiae. The enzyme removes the beta phosphate from DGPP to form phosphatidate. The substrate and product of the DGPP phosphatase reaction play roles in lipid signaling and in cell metabolism. The deduced primary structure of the DGPP phosphatase protein contains a three-domain phosphatase sequence motif. In this work, we examined the hypothesis that the phosphatase sequence motif in the enzyme is involved in the DGPP phosphatase reaction. The amino acid residues Arg(125), His(169), and His(223) in domains 1, 2, and 3, respectively, of the phosphatase sequence motif were changed to alanine residues by site-directed mutagenesis. The mutant DPP1(R125A), DPP1(H169A), and DPP1(H223A) alleles were cloned into a yeast shuttle vector and then expressed in a dpp1Delta lpp1Delta double mutant that lacks DGPP phosphatase activity. Northern blot and immunoblot analyses showed that the mutations in the phosphatase sequence motif did not affect the expression of the enzyme. The DGPP phosphatase activities of the R125A, the H169A, and the H223A mutant enzymes were 0.05, 9, and 0.03%, respectively, of the DGPP phosphatase activity of the wild-type enzyme. Enzymes with mutations in more than one domain of the phosphatase sequence motif had no measurable DGPP phosphatase activity. The R125A and H233A mutant DGPP phosphatase enzymes had reduced V(max) and elevated K(m) values for DGPP when compared with the wild-type enzyme. The H169A mutant enzyme had reduced V(max) and K(m) values when compared with the control. The specificity constants (V(max)/K(m)()) for DGPP of the R125A mutant and H233A mutant enzymes were 4610-fold and 15 367-fold lower, respectively, when compared to the wild-type enzyme. The studies reported here indicated that the phosphatase sequence motif played an important role in the reaction catalyzed by the S. cerevisiae DGPP phosphatase.