ABSTRACT Klotho has profound effects on phosphate metabolism, but the mechanisms of how Klotho affects phosphate homeostasis is unknown. We detected Klotho in the proximal tubule cell, brush border, and urinary lumen, where phosphate homeostasis resides. Increasing Klotho in the kidney and urine chronically by transgenic overexpression or acutely by intravenous infusion caused hypophosphatemia, phosphaturia from decreased proximal phosphate reabsorption, and decreased activity and protein of the principal renal phosphate transporter NaPi‐2a. The phosphaturic effect was present in FGF23‐null mice, indicating a direct action distinct from Klotho's known role as a coreceptor for FGF23. Direct inhibition of NaPi‐2a by Klotho was confirmed in cultured cells and in cell‐free membrane vesicles characterized by acute inhibition of transport activity followed by decreased cell surface protein. Transport inhibition can be mimicked by recombinant β‐glucuronidase and is associated with proteolytic degradation and reduced surface NaPi‐2a. The inhibitory effect of Klotho on NaPi‐2a was blocked by β‐glucuronidase inhibitor but not by protease inhibitor. Klotho is a novel phosphaturic substance that acts as an enzyme in the proximal tubule urinary lumen by modifying glycans, which cause decreased transporter activity, followed by proteolytic degradation and possibly internalization of NaPi‐2a from the apical membrane.—Hu, M. C., Shi, M., Zhang, J., Pastor, J., Nakatani, T., Lanske, B., Shawkat Razzaque, M., Rosenblatt, K. P., Baum, M. G., Kuro‐o, M., Moe, O. W. Klotho: a novel phosphaturic substance acting as an autocrine enzyme in the renal proximal tubule. FASEB J . 24, 3438–3450 (2010). www.fasebj.org