We previously reported that the yeast Saccharomyces cerevisiae ISC1 gene (Yer019w), which has homology to the bacterial sphingomyelinase gene, encodes inositol phosphosphingolipids-phospholipase C, Isc1p [Sawai, H., Okamoto, Y., Luberto, C., Mao, C., Bielawska, A., Domae, M., and Hannun, Y. A. (2000) J. Biol. Chem. 275, 39793-39798]. The present study was conducted to determine specific domains in Isc1p required for catalysis. Several amino acid residues are conserved from bacterial sphingomyelinase to mammalian sphingomyelinase and are also found in ISC1. Individual mutation of the conserved E100, N233, and H334 resulted in complete loss of Isc1p activity, suggesting an essential role in catalysis for these amino acid residues. Isc1p also contains a domain (from G162 to S169) with homology to P-loop domains, found in nucleotide-binding proteins. In addition, two amino acid residues from this domain, D163 and K168, are conserved from bacterial to mammalian sphingomyelinases in this "P-loop-like domain". G162, D163, G167, K168, and S169 were replaced individually with alanine using site-directed mutagenesis. D163A and K168A lost activity completely. Mutations in the other three positions rendered enzyme versions with much reduced but detectable activity. The V(max) values for G162A, G167A, and S169A were reduced, compared with wild type, but the K(m) values for G162A, G167A, and S169A were similar to that of wild type, indicating that the substrate binding efficiency was not greatly altered in these mutants and that the P-loop-like domain of ISC1 might be essential in catalysis of Isc1p. Furthermore, the Mg(2+) K(a) constants for G162A, G167, and S169A were higher than that for wild type, suggesting that this P-loop-like domain may be involved in Mg(2+) binding. Although cell lysates from yeast cells overexpressing all mutants similarly bound to phosphatidylserine (PS), an anionic lipid activator of Isc1p, G162A and G167A required 13.3 mol % PS to achieve maximum activity compared to 6.7 mol % for the wild-type enzyme, suggesting that PS might play a role in optimal catalytic efficiency of Isc1p via this P-loop-like domain. This study provides novel insight into a new domain found in Isc1p and related enzymes.