Sac domain-containing proteins belong to a newly identified family of phosphoinositide phosphatases (the PIPPase family). Despite well-characterized enzymatic activity, the biological functions of this mammalian Sac domain PIPPase family remain largely unknown. We identified a novel Sac domain-containing protein, rat Sac3 (rSac3), which is widely expressed in various tissues and localized to the endoplasmic reticulum, Golgi complex and recycling endosomes. rSac3 displays PIPPase activity with PI(3)P, PI(4)P and PI(3,5)P(2) as substrates in vitro, and a mutation in the catalytic core of the Sac domain abolishes its enzymatic activity. The expression of rSac3 is upregulated during nerve growth factor (NGF)-stimulated PC12 cell neuronal differentiation, and overexpression of this protein promotes neurite outgrowth in PC12 cells. Conversely, inhibition of rSac3 expression by antisense oligonucleotides reduces neurite outgrowth of NGF-stimulated PC12 cells, and the active site mutation of rSac3 eliminates its neurite-outgrowth-promoting activity. These results indicate that rSac3 promotes neurite outgrowth in differentiating neurons through its PIPPase activity, suggesting that Sac domain PIPPase proteins may participate in forward membrane trafficking from the endoplasmic reticulum and Golgi complex to the plasma membrane, and may function as regulators of this crucial process of neuronal cell growth and differentiation.