Phosphatidic acid (PA), lysophosphatidic acid, ceramide 1-phosphate (C1P), and sphingosine 1-phosphate (S1P) are lipid mediators generated by phospholipases, sphingomyelinases, and lipid kinases. The major pathway for degradation of these lipids is dephosphorylation catalyzed by members of two classes (types 1 and 2) of phosphohydrolase activities (PAPs). cDNAs encoding two type 2 PAPs, PAP-2a and -2b, have been expressed by transient transfection and shown to catalyze hydrolysis of PA, C1P, and S1P (Kai, M., Wada, I., Imai, S., Sakane, F. and Kanoh, H. (1997) J. Biol. Chem. 272, 24572-24578). We report the cloning and expression of a third type 2 PAP enzyme (288 amino acids, predicted molecular mass of 32.6 kDa), PAP-2c, which exhibits 54 and 43% sequence homology to PAPs 2a and 2b. Expression of HA epitope-tagged PAP-2a, -2b, and 2c in HEK293 cells produced immunoreactive proteins and increased membrane-associated PAP activity. Sf9 insect cells contain very low endogenous PAP activity. Recombinant expression of the three PAP enzymes using baculovirus vectors produces dramatic increases in membrane-associated Mg2+-independent, N-ethylmaleimide-insensitive PAP activity. Expression of PAP-2a but not PAP-2b or -2c resulted in high levels of cell surface PAP activity in intact insect cells. Kinetic analysis of PAP-2a, -2b, and -2c activity against PA, lysophosphatidic acid, C1P, and S1P presented in mixed micelles of Triton X-100 revealed differences in substrate specificity and susceptibility to inhibition by sphingosine, Zn2+, and propranol.