The existence of specific dl-glycerol-3-phosphatase (EC 3.1.3.21) activity in extracts of Saccharomyces cerevisiae was confirmed by examining strains lacking nonspecific acid and alkaline phosphatase activities. During purification of the glycerol-3-phosphatase, two isozymes having very similar molecular weights were isolated by gel filtration and anion exchange chromatography. By microsequencing of trypsin-generated peptides the corresponding genes were identified as previously sequenced open reading frames of unknown function. The two genes, GPP1 (YIL053W) and GPP2 (YER062C) encode proteins that show 95% amino acid identity and have molecular masses of 30.4 and 27.8 kDa, respectively. The intracellular concentration of Gpp2p increases in cells subjected to osmotic stress, while the production of Gpp1p is unaffected by changes of external osmolarity. Both isoforms have a high specificity for dl-glycerol-3-phosphate, pH optima at 6.5, and KmG3P in the range of 3-4 mM. The osmotic induction of Gpp2p is blocked in cells that are defective in the HOG-mitogen-activated protein kinase pathway, indicating that GPP2 is a target gene for this osmosensing signal transduction pathway. Together with DOG1 and DOG2, encoding two highly homologous enzymes that dephosphorylate 2-deoxyglucose-6-phosphate, GPP1 and GPP2 constitute a new family of genes for low molecular weight phosphatases.