The nonspecific phospholipase C from Bacillus cereus is a zinc metalloenzyme that catalyzes the hydrolysis of phospholipids to yield diacylglycerol and a phosphate monoester. Glu-4 has been proposed as a potential candidate for the general base in the hydrolysis reaction and was shown to interact with the substrate headgroup. Site-specific mutagenesis studies suggest that Glu-4 is important for substrate binding but not for catalysis. This residue is also critical for the enzyme's preference for a phosphodiester substrate. PA, both monomeric and micellar, is shown to be a poor substrate and inhibitor of wild-type PLC. When Glu-4 was mutated to an alanine, a significant increase in PA hydrolysis and a decrease in PC hydrolysis were observed. Unlike the wild type, kinetic studies suggest that the Glu-4-->Ala mutant does not exhibit interfacial activation and processive catalysis. Glu-4 is part of a highly flexible loop flanking the entrance to the active site, suggesting that this loop might constitute an interfacial binding recognition site. This is the first evidence for the presence of an interfacial binding site distinct from the active site in the nonspecific PLC.