A full-length cDNA encoding an extracellular form of phytase was isolated from the model legume Medicago truncatula. The phytase cDNA (MtPHY1) has an open reading frame of 1,632 bp predicted to encode 543 amino acids including an N-terminal signal peptide of 27 amino acids. The MtPHY1 gene is 5,151 bp in length, containing 7 exons and 6 introns. MtPHY1 transcripts were detected in leaves and roots and levels elevated in roots during growth in low phosphate conditions. Transgenic Arabidopsis lines expressing MtPHY1 under the control of the root-specific MtPT1 promoter or the constitutive CaMV35S promoter were created. Phytase activities in root apoplast of the transgenic Arabidopsis were 12.3- to 16.2-fold higher than those of the control plants. The expressed phytase was secreted into the rhizosphere as demonstrated by enzyme activity staining and HPLC analysis of phytate degradation by root exudates. Transgenic expression of the MtPHY1 led to significant improvement in organic phosphorus utilization and plant growth. When phytate was supplied as the sole source of phosphorus, dry weight of the transgenic Arabidopsis lines were 3.1- to 4.0-fold higher than the control plants and total phosphorus contents were 4.1- to 5.5-fold higher than the control. Transgenic expression of phytase genes of plant origin has great potential for improving plant phosphorus acquisition and for phytoremediation.