The alarmone nucleotides guanosine tetraphosphate and pentaphosphate, commonly referred to as (p)ppGpp, regulate bacterial responses to nutritional and other stresses. There is evidence for potential existence of a third alarmone, guanosine-5'-monophosphate-3'-diphosphate (pGpp), with less-clear functions. Here, we demonstrate the presence of pGpp in bacterial cells, and perform a comprehensive screening to identify proteins that interact respectively with pGpp, ppGpp and pppGpp in Bacillus species. Both ppGpp and pppGpp interact with proteins involved in inhibition of purine nucleotide biosynthesis and with GTPases that control ribosome assembly or activity. By contrast, pGpp interacts with purine biosynthesis proteins but not with the GTPases. In addition, we show that hydrolase NahA (also known as YvcI) efficiently produces pGpp by hydrolyzing (p)ppGpp, thus modulating alarmone composition and function. Deletion of nahA leads to reduction of pGpp levels, increased (p)ppGpp levels, slower growth recovery from nutrient downshift, and loss of competitive fitness. Our results support the existence and physiological relevance of pGpp as a third alarmone, with functions that can be distinct from those of (p)ppGpp.