2,4-Diacetylphloroglucinol hydrolase PhlG from Pseudomonas fluorescens catalyzes hydrolytic carbon-carbon (C-C) bond cleavage of the antibiotic 2,4-diacetylphloroglucinol to form monoacetylphloroglucinol, a rare class of reactions in chemistry and biochemistry. To investigate the catalytic mechanism of this enzyme, we determined the three-dimensional structure of PhlG at 2.0 A resolution using x-ray crystallography and MAD methods. The overall structure includes a small N-terminal domain mainly involved in dimerization and a C-terminal domain of Bet v1-like fold, which distinguishes PhlG from the classical alpha/beta-fold hydrolases. A dumbbell-shaped substrate access tunnel was identified to connect a narrow interior amphiphilic pocket to the exterior solvent. The tunnel is likely to undergo a significant conformational change upon substrate binding to the active site. Structural analysis coupled with computational docking studies, site-directed mutagenesis, and enzyme activity analysis revealed that cleavage of the 2,4-diacetylphloroglucinol C-C bond proceeds via nucleophilic attack by a water molecule, which is coordinated by a zinc ion. In addition, residues Tyr(121), Tyr(229), and Asn(132), which are predicted to be hydrogen-bonded to the hydroxyl groups and unhydrolyzed acetyl group, can finely tune and position the bound substrate in a reactive orientation. Taken together, these results revealed the active sites and zinc-dependent hydrolytic mechanism of PhlG and explained its substrate specificity as well.