Staphylococcus aureus synthesizes polyglycerol-phosphate lipoteichoic acid (LTA) from phosphatidylglycerol. LtaS, a predicted membrane protein with 5 N-terminal transmembrane helices followed by a large extracellular part (eLtaS), is required for staphylococcal growth and LTA synthesis. Here, we report the first crystal structure of the eLtaS domain at 1.2-A resolution and show that it assumes a sulfatase-like fold with an alpha/beta core and a C-terminal part composed of 4 anti-parallel beta-strands and a long alpha-helix. Overlaying eLtaS with sulfatase structures identified active site residues, which were confirmed by alanine substitution mutagenesis and in vivo enzyme function assays. The cocrystal structure with glycerol-phosphate and the coordination of a Mn(2+) cation allowed us to propose a reaction mechanism, whereby the active site threonine of LtaS functions as nucleophile for phosphatidylglycerol hydrolysis and formation of a covalent threonine-glycerolphosphate intermediate. These results will aid in the development of LtaS-specific inhibitors for S. aureus and many other Gram-positive pathogens.