The regulatory nucleotide guanosine 5'-diphosphate, 3'-diphosphate (ppGpp) and its precursor guanosine 5'-triphosphate, 3'-diphosphate (pppGpp) are accumulated during stringent response in bacterial cells. The enzyme pppGpp-5'-phosphohydrolase, which catalyzes the conversion of pppGpp to ppGpp, was partially purified from Escherichia coli. It has Mr = 140,000 and an apparent Km of 0.11 mM for pppGpp. It requires Mg2+ and a monovalent cation. NH4+ is preferred over K+, while Na+ is inactive. The enzyme does not hydrolyze GTP, ATP, pppApp, or ppGpp. It is also not effectively inhibited by these nucleotides. pppGpp-5'-phosphohydrolase hydrolyzes the 3'-monophosphate analog pppGp equally well (apparent Km of 0.13 mM), yielding the recently identified MS III nucleotide (ppGp). pppGpp-5'-phosphohydrolase does not have RNA 5'-terminal gamma-phosphatase activity; however, 5'-terminal phosphates are released by pppGpp-5'-phosphohydrolase when the GTP-terminated RNA chains are first converted into oligonucleotides by RNase A treatment. pppGpp-5'-phosphohydrolase was found to actively hydrolyze the dinucleotide fragment pppGpNp but exhibited very low activity toward longer chain fragments. The 3'-unphosphorylated dinucleotide pppGpN was, however, not hydrolyzed. The ability of pppGpp-5'-phosphohydrolase to hydrolyze pppGpp, pppGp, and pppGpNp, but not pppG and pppGpN, indicates that pppGpp-5'-phosphohydrolase is rather nonspecific toward the 3'-OH substitutions of the substrates although a free, unsubstituted phosphate group at the 3'-OH position is essential.