Pah1 is the phosphatidate phosphatase in the yeast Saccharomyces cerevisiae that produces diacylglycerol for triacylglycerol synthesis and concurrently controls the levels of phosphatidate used for phospholipid synthesis. Phosphorylation and dephosphorylation of Pah1 regulate its subcellular location and phosphatidate phosphatase activity. Compared with its phosphorylation by multiple protein kinases, Pah1 is dephosphorylated by a protein phosphatase complex consisting of Nem1 (catalytic subunit) and Spo7 (regulatory subunit). In this work, we characterized the Nem1-Spo7 phosphatase complex for its enzymological, kinetic, and regulatory properties with phosphorylated Pah1. The dephosphorylation of Pah1 by Nem1-Spo7 phosphatase resulted in the stimulation (6-fold) of phosphatidate phosphatase activity. For Pah1 phosphorylated by the Pho85-Pho80 kinase complex, maximum Nem1-Spo7 phosphatase activity required Mg(2+) ions (8 mm) and Triton X-100 (0.25 mm) at pH 5.0. The energy of activation for the reaction was 8.4 kcal/mol, and the enzyme was thermally labile at temperatures above 40 °C. The enzyme activity was inhibited by sodium vanadate, sodium fluoride, N-ethylmaleimide, and phenylglyoxal but was not significantly affected by lipids or nucleotides. Nem1-Spo7 phosphatase activity was dependent on the concentrations of Pah1 phosphorylated by Pho85-Pho80, Cdc28-cyclin B, PKA, and PKC with kcat and Km values of 0.29 s(-1) and 81 nm, 0.11 s(-1) and 127 nm, 0.10 s(-1) and 46 nm, and 0.02 s(-1) and 38 nm, respectively. Its specificity constant (kcat/Km) for Pah1 phosphorylated by Pho85-Pho80 was 1.6-, 4-, and 6-fold higher, respectively, than that phosphorylated by PKA, Cdc28-cyclin B, and PKC.