Phosphatidylinositol (PI), once regarded as an obscure component of membranes, is now recognized as an important reservoir of second messenger precursors and as an anchor for membrane enzymes. PI-specific phospholipase C (PI-PLC) is the enzyme that cleaves PI, invoking numerous cellular responses. The crystal structure of PI-PLC from Bacillus cereus (EC 3.1.4.10) has been solved at 2.6 A resolution and refined to a crystallographic R factor of 18.7%. The structure consists of an imperfect (beta alpha)8-barrel similar to that first observed for triose phosphate isomerase and does not resemble any other known phospholipase structure. The active site of the enzyme has been identified by determining the structure of PI-PLC in complex with its inhibitor, myo-inositol, at 2.6 A resolution (R factor = 19.5%). This substrate-like inhibitor interacts with a number of residues highly conserved among prokaryotic PI-PLCs. Residues His32 and His82, which are also conserved between prokaryotic and eukaryotic PI-PLCs, most likely act as general base and acid respectively in a catalytic mechanism analogous to that observed for ribonucleases.