Golgi-resident bisphosphate nucleotidase 2 (BPNT2) is a member of a family of magnesium-dependent, lithium-inhibited phosphatases that share a three-dimensional structural motif that directly coordinates metal binding to effect phosphate hydrolysis. BPNT2 catalyzes the breakdown of 3′-phosphoadenosine-5′-phosphate, a by-product of glycosaminoglycan (GAG) sulfation. KO of BPNT2 in mice leads to skeletal abnormalities because of impaired GAG sulfation, especially chondroitin-4-sulfation, which is critical for proper extracellular matrix development. Mutations in BPNT2 have also been found to underlie a chondrodysplastic disorder in humans. The precise mechanism by which the loss of BPNT2 impairs sulfation remains unclear. Here, we used mouse embryonic fibroblasts (MEFs) to test the hypothesis that the catalytic activity of BPNT2 is required for GAG sulfation in vitro. We show that a catalytic-dead Bpnt2 construct (D108A) does not rescue impairments in intracellular or secreted sulfated GAGs, including decreased chondroitin-4-sulfate, present in Bpnt2-KO MEFs. We also demonstrate that missense mutations in Bpnt2 adjacent to the catalytic site, which are known to cause chondrodysplasia in humans, recapitulate defects in overall GAG sulfation and chondroitin-4-sulfation in MEF cultures. We further show that treatment of MEFs with lithium (a common psychotropic medication) inhibits GAG sulfation and that this effect depends on the presence of BPNT2. Taken together, this work demonstrates that the catalytic activity of an enzyme potently inhibited by lithium can modulate GAG sulfation and therefore extracellular matrix composition, revealing new insights into lithium pharmacology.