The cyclic dinucleotide c-di-AMP [corrected] synthesized by the diadenylate cyclase domain was discovered recently [corrected] as a messenger molecule for signaling DNA breaks in Bacillus subtilis. By searching bacterial genomes, we identified a family of DHH/DHHA1 domain proteins (COG3387) that co-occur with a subset of the diadenylate cyclase domain proteins. Here we report that the B. subtilis protein YybT, a member of the COG3387 family proteins, exhibits phosphodiesterase activity toward cyclic dinucleotides. The DHH/DHHA1 domain hydrolyzes c-di-AMP and c-di-GMP to generate the linear dinucleotides 5'-pApA and 5'-pGpG. The data suggest that c-di-AMP could be the physiological substrate for YybT given the physiologically relevant Michaelis-Menten constant (K(m)) and the presence of YybT family proteins in the bacteria lacking c-di-GMP signaling network. The bacterial regulator ppGpp was found to be a strong competitive inhibitor of the DHH/DHHA1 domain, suggesting that YybT is under tight control during stringent response. In addition, the atypical GGDEF domain of YybT exhibits unexpected ATPase activity, distinct from the common diguanylate cyclase activity for GGDEF domains. We further demonstrate the participation of YybT in DNA damage and acid resistance by characterizing the phenotypes of the DeltayybT mutant. The novel enzymatic activity and stress resistance together point toward a role for YybT in stress signaling and response.