In the budding yeast Saccharomyces cerevisiae, mutations in the essential gene CDC1 cause defects in Golgi inheritance and actin polarization. However, the biochemical function of Cdc1p is unknown. Previous work showed that cdc1 mutants accumulate intracellular Ca(2+) and display enhanced sensitivity to the extracellular Mn(2+) concentration, suggesting that Cdc1p might regulate divalent cation homeostasis. By contrast, our data indicate that Cdc1p is a Mn(2+)-dependent protein that can affect Ca(2+) levels. We identified a cdc1 allele that activates Ca(2+) signaling but does not show enhanced sensitivity to the Mn(2+) concentration. Furthermore, our studies show that Cdc1p is an endoplasmic reticulum-localized transmembrane protein with a putative phosphoesterase domain facing the lumen. cdc1 mutant cells accumulate an unidentified phospholipid, suggesting that Cdc1p may be a lipid phosphatase. Previous work showed that deletion of the plasma membrane Ca(2+) channel Cch1p partially suppressed the cdc1 growth phenotype, and we find that deletion of Cch1p also suppresses the Golgi inheritance and actin polarization phenotypes. The combined data fit a model in which the cdc1 mutant phenotypes result from accumulation of a phosphorylated lipid that activates Ca(2+) signaling.