myo-Inositol monophosphatase catalyzes dephosphorylation of the synthetic substrate anthraniloyl-2'-AMP. Binding of this fluorescent substrate to Tb(III)-monophosphatase was monitored by luminescence spectroscopy. The anthraniloyl chromophore excited at 330 nm sensitizes the long lived luminescence of enzyme bound Tb(III) at 490, 545, 585 and 620 nm. Assuming a mechanism of radiationless energy transfer, the actual distance of separation between the donor anthraniloyl moiety and the acceptor Tb(III) was calculated to be R = 10 angstroms. The binding studies support the earlier observation of Bone et al. (Proc. Natl. Acad. Sci. USA 89 (1992) 10031-10035) that the substrate and the lanthanide Gd(III) interact with a common binding domain of the protein. The catalytic activity of the monophosphatase is completely dependent upon Mg(II) ions which elicit changes in the secondary structure of the protein as revealed by circular dichroism measurements. Binding of Mg(II) ions tend to stabilize the secondary structure of the phosphatase against guanidinium-HCl denaturation.