The acyl carrier proteins (ACPs) of fatty acid synthesis are functional only when modified by attachment of the prosthetic group, 4'-phosphopantetheine (4'-PP), which is transferred from CoA to the hydroxyl group of a specific serine residue. Almost 40 years ago Vagelos and Larrabee reported an enzyme from Escherichia coli that removed the prosthetic group. We report that this enzyme, called ACP hydrolyase or ACP phosphodiesterase, is encoded by a gene (yajB) of previously unknown function that we have renamed acpH. A mutant E. coli strain having a total deletion of the acpH gene has been constructed that grows normally, showing that phosphodiesterase activity is not essential for growth, although it is required for turnover of the ACP prosthetic group in vivo. ACP phosphodiesterase (AcpH) has been purified to homogeneity for the first time and is a soluble protein that very readily aggregates upon overexpression in vivo or concentration in vitro. The purified enzyme has been shown to cleave acyl-ACP species with acyl chains of 6-16 carbon atoms and is active on some, but not all, non-native ACP species tested. Possible physiological roles for AcpH are discussed.