Regulation of intracellular ion concentration is an essential function of all cells. In this study, we report the identification of two previously uncharacterized genes, PSR1 and PSR2, that perform an essential function under conditions of sodium ion stress in the yeast Saccharomyces cerevisiae. Psr1p and Psr2p are highly homologous and were identified through their homology with the endoplasmic reticulum membrane protein Nem1p. Localization and biochemical fractionation studies show that Psr1p is associated with the plasma membrane via a short amino-terminal sequence also present in Psr2p. Growth of the psr1psr2 mutant is severely inhibited under conditions of sodium but not potassium ion or sorbitol stress. This growth defect is due to the inability of the psr1psr2 mutant to properly induce transcription of ENA1/PMR2, the major sodium extrusion pump of yeast cells. We provide genetic evidence that this regulation is independent of the phosphatase calcineurin, previously implicated in the sodium stress response in yeast. We show that Psr1p contains a DXDX(T/V) phosphatase motif essential for its function in vivo and that a Psr1p-PtA fusion purified from yeast extracts exhibits phosphatase activity. Based on these data, we suggest that Psr1p/Psr2p, members of an emerging class of eukaryotic phosphatases, are novel regulators of salt stress response in yeast.