PHOSPHO1, a phosphoethanolamine/phosphocholine phosphatase, is upregulated in mineralising cells and is thought to be involved in the generation of inorganic phosphate for bone mineralisation. PHOSPHO2 is a putative phosphatase sharing 42% sequence identity with PHOSPHO1. Both proteins contain three catalytic motifs, conserved within the haloacid dehalogenase superfamily. Mutation of Asp32 and Asp203, key residues within two motifs, abolish PHOSPHO1 activity and confirm it as a member of this superfamily. We also show that Asp43 and Asp123, residues that line the substrate-binding site in our PHOSPHO1 model, are important for substrate hydrolysis. Further comparative modelling reveals that the active sites of PHOSPHO1 and PHOSPHO2 are very similar, but surprisingly, recombinant PHOSPHO2 hydrolyses phosphoethanolamine and phosphocholine relatively poorly. Instead, PHOSPHO2 shows high specific activity toward pyridoxal-5-phosphate (V(max) of 633 nmol min(-1) mg(-1) and K(m) of 45.5 microM). Models of PHOSPHO2 and PHOSPHO1 suggest subtle differences in the charge distributions around the putative substrate entry site and in the location of potential H-bond donors.