Nudix hydrolases are a superfamily of pyrophosphatases, most of which are involved in clearing the cell of potentially deleterious metabolites and in preventing the accumulation of metabolic intermediates. We determined that the product of the orf17 gene of Escherichia coli, a Nudix NTP hydrolase, catalyzes the hydrolytic release of pyrophosphate from dihydroneopterin triphosphate, the committed step of folate synthesis in bacteria. That this dihydroneopterin hydrolase (DHNTPase) is indeed a key enzyme in the folate pathway was confirmed in vivo: knockout of this gene in E. coli leads to a marked reduction in folate synthesis that is completely restored by a plasmid carrying the gene. We also determined the crystal structure of this enzyme using data to 1.8 A resolution and studied the kinetics of the reaction. These results provide insight into the structural bases for catalysis and substrate specificity in this enzyme and allow the definition of the dihydroneopterin triphosphate pyrophosphatase family of Nudix enzymes.