The DPP1 gene, encoding diacylglycerol pyrophosphate (DGPP) phosphatase from Saccharomyces cerevisiae, has recently been identified as a zinc-regulated gene, and it contains a putative zinc-responsive element (UAS(ZRE)) in its promoter. In this work we examined the hypothesis that expression of DGPP phosphatase was regulated by zinc availability. The deprivation of zinc from the growth medium resulted in a time- and dose-dependent induction of beta-galactosidase activity driven by a P(DPP1)-lacZ reporter gene. This regulation was dependent on the UAS(ZRE) in the DPP1 promoter and was mediated by the Zap1p transcriptional activator. Induction of the DGPP phosphatase protein and activity by zinc deprivation was demonstrated by immunoblot analysis and measurement of the dephosphorylation of DGPP. The regulation pattern of DGPP phosphatase in mutants defective in plasma membrane (Zrt1p and Zrt2p) and vacuolar membrane (Zrt3p) zinc transporters indicated that enzyme expression was sensitive to the cytoplasmic levels of zinc. DGPP phosphatase activity was inhibited by zinc by a mechanism that involved formation of DGPP-zinc complexes. Studies with well characterized subcellular fractions and by indirect immunofluorescence microscopy revealed that the DGPP phosphatase enzyme was localized to the vacuolar membrane.