Characterization of the enzymes involved in metabolism of 3-phosphorylated inositol lipids and their subcellular localization revealed that in vitro a 5-phosphatase activity was responsible for the degradation of phosphatidylinositol 3,4,5-trisphosphate, whereas a 3-phosphatase activity hydrolyzed phosphatidylinositol 3-phosphate and/or phosphatidylinositol 3,4-bisphosphate. All these activities were localized in the cytosol. No phospholipase activities were detected. The cytosolic phosphatidylinositol 3,4,5-trisphosphate 5-phosphatase activity was purified to near homogeneity using ion exchange, affinity, and size exclusion chromatography. Characterization of the purified phosphatase revealed that it is a magnesium-dependent 5-phosphatase that is able to hydrolyze phosphatidylinositol 4,5-bisphosphate and phosphatidylinositol 3,4,5-trisphosphate. The enzyme is only partially inhibited by neomycin and vanadate but is strongly inhibited by phosphatidylinositol 4,5-bisphosphate and to a slightly lesser extent by phosphatidylinositol 4-phosphate.