The Mg(\u272+)-dependent phosphatidate phosphohydrolase (PAPase) activity has been studied in rat lung subcellular fractions, and a malignant cell line (A549) which serves as a model of human Type II pneumocytes. Properties of this activity, which used a chemically-defined substrate of equimolar PC and PA, were equivalent to those found using membrane-bound substrate. Microsomes washed in buffers containing high salt concentrations displayed a decrease in the PAPase which could be quantitatively recovered in the wash supernatant. Mg(\u272+)-independent activity remained associated with the microsomes under these conditions. These microsomes displayed a reduced capacity to label glycerolipids from (\u2714)C -glycerol phosphate. Labelling could be returned to normal levels by the addition of PAPase from cytosol, wash supernatant, or fractionated cytosol, indicating that this activity was required for biosynthesis of glycerolipids. Determination of the stability constant for magnesium phosphatidate (MgPA) allowed the calculation of the free and bound levels of Mg(\u272+) and PA under assay conditions. The Mg(\u272+) concentration at maximum enzyme activity correlated with the intersection of the increasing free Mg(\u272+) and decreasing free PA which was being converted to the MgPA salt. The MgPA salt appeared to be the required form of the substrate. Chlorpromazine did not replace the requirement for Mg(\u272+) although it stimulated the Mg(\u272+)-independent activity. Triton X-100, Ca(\u272+), and chlorpromazine inhibited the PAPase activity. Examination of the substrate requirements, Mg(\u272+)-requirements, detergent inhibitions, thermal inactivation, molecular weight, and dissociation and reassociation capabilities led to the conclusion that the PAPase activity in microsomes and cytosol was the same enzyme in two subcellular locations. Further studies using digitonin permeated A549 cells demonstrated that the intracellular distribution of the PAPase activity could be shifted from predominately cytosolic to an essentially particulate location upon treatment with 1-4 mM oleate. (\u273)H -oleate did not accumulate in PA under these conditions but rapidly accumulated as MG, DG, TG and PC. This indicated that the translocation of the PAPase functioned to achieve greater glycerolipid synthesis and to maintain the concentration of PA, which is potentially disruptive to membrane integrity, low in times of metabolic flux