The RdgC/PPEF family of serine/threonine protein phosphatases is distinguished by the presence of C-terminal EF-hands and neuron-specific expression, including frequent expression in primary sensory neurons. Here we report that the sole Caenorhabditis elegans PPEF (CePPEF) homolog is also highly expressed in primary sensory neurons and is not found outside the nervous system. Neurons expressing CePPEF include the ciliary chemosensory neurons AWB and AWC; and within these neurons, CePPEF is highly enriched in the sensory cilia. In transgenic C. elegans and in transfected 293 cells, CePPEF is membrane-associated, and the N terminus of CePPEF is necessary and sufficient for this membrane association. [(3)H]Myristate and [(3)H]palmitate labeling studies in 293 cells demonstrated that this association was mediated by myristoylation at Gly(2) and palmitoylation at Cys(3). Introducing the G2A or C3S mutation into CePPEF greatly reduced membrane association in 293 cells and in transgenic nematodes. A recombinant C-terminal fragment of CePPEF containing two putative EF-hands bound between one and two Ca(2+) ions/protein, and mutation of residues presumed to ligand calcium in the two putative EF-hands led to diminished calcium binding. These results establish the first direct evidence for fatty acylation and calcium binding of a PPEF family member and demonstrate a remarkable conservation of sensory neuron expression among the members of this distinctive family of protein phosphatases.