Preparations of the trehalose-6-phosphate synthase/phosphatase complex from Saccharomyces cerevisiae contain three polypeptides with molecular masses 56, 100 and 130 kDa, respectively. Recently, we have cloned the gene for the 56-kDa subunit of this complex (TPS1) and found it to be identical with CIF1, a gene essential for growth on glucose and for the activity of trehalose-6-phosphate synthase. Peptide sequencing of the 100-kDa subunit of the trehalose-6-phosphate synthase/phosphatase complex (TPS2) revealed one sequence to be 100% identical with the deduced amino acid sequence of the upstream region of PPH3 on the right arm of chromosome IV. This sequence was used to clone an upstream region of PPH3 containing an open reading frame of 2685 nucleotides, predicted to encode a polypeptide of 102.8 kDa. The N-terminal sequence, as well as three internal amino acid sequences, obtained from peptide sequencing of the 100-kDa subunit, were identical with specific regions of the deduced amino acid sequence. Thus, the sequence cloned represents TPS2, the gene encoding the 100-kDa subunit of the trehalose-6-phosphate synthase/phosphatase complex. Interestingly, a stretch of about 500 amino acids from the first part of TPS2 was 33% identical with the entire TPS1 sequence. Disruption of TPS2 had no effect on trehalose-6-phosphate synthase activity but caused complete loss of trehalose-6-phosphate phosphatase activity, measured in vitro, and accumulation of excessive amounts of trehalose-6-phosphate instead of trehalose upon heat shock or entrance into stationary phase in vivo. These results suggest that TPS2 codes for the structural gene of the trehalose-6-phosphate phosphatase. Heat shock induced an increase in trehalose-6-phosphate phosphatase activity and this was preceded by an accumulation in TPS2 mRNA, suggesting that the trehalose-6-phosphate phosphatase is subjected to transcriptional control under heat-shock conditions.