Regulation of phosphatidate phosphatase (EC 3.1.34) activity was examined in Saccharomyces cerevisiae cells supplemented with phospholipid precursors. Addition of inositol to the growth medium of wild-type cells resulted in a twofold increase in phosphatidate phosphatase activity. The increase in phosphatidate phosphatase activity was not due to soluble effector molecules, and inositol did not have a direct effect on enzyme activity. The phosphatidate phosphatase activity associated with the mitochondrial, microsomal, and cytosolic fractions of the cell was regulated by inositol in the same manner. Cells supplemented with inositol had elevated phospholipid levels and reduced triacylglycerol levels compared with unsupplemented cells. Serine, ethanolamine, and choline did not significantly affect the phosphatidate phosphatase activity of cells grown in the absence or presence of inositol. Enzyme activity was not regulated in inositol biosynthesis regulatory mutants, suggesting that regulation by inositol is coupled to regulation of inositol biosynthesis. Phosphatidate phosphatase activity was pleiotropically expressed in structural gene mutants defective in phospholipid biosynthesis. These results suggested that phosphatidate phosphatase was regulated by inositol at a genetic level.