Human PHOSPHO1 is a phosphatase enzyme for which expression is upregulated in mineralizing cells. This enzyme has been implicated in the generation of P(i) for matrix mineralization, a process central to skeletal development. PHOSPHO1 is a member of the haloacid dehalogenase (HAD) superfamily of Mg2+-dependent hydrolases. However, substrates for PHOSPHO1 are, as yet, unidentified and little is known about its activity. We show here that PHOSPHO1 exhibits high specific activities toward phosphoethanolamine (PEA) and phosphocholine (PCho). Optimal enzymic activity was observed at approx. pH 6.7. The enzyme shows a high specific Mg2+-dependence, with apparent K(m) values of 3.0 microM for PEA and 11.4 microM for PCho. These results provide a novel mechanism for the generation of P(i) in mineralizing cells from PEA and PCho.