DHS-1-P phosphatases cloned from yeast represent novel lipid phosphatases, which were not thought to exist in yeast. Identification and characterization of YSR2 and YSR3 have demonstrated that the DHS-1-P phosphatase is an important mediator in the biosynthesis of sphingolipids and in the maintenance of the balance of signaling lipid molecules ceramide, sphingosine, and sphingosine-1-P. Methods introduced here for purification, activity assay, in vivo labeling, and cellular localization using GFP tagging are expected to facilitate our understanding of this enzyme.