Reversible phosphorylation is recognized to be a major mechanism for the control of intracellular events in eukaryotic cells. From a human fetal brain cDNA library, we isolated a cDNA clone encoding a novel dual specificity protein phosphatase, which showed 88% identity with previously reported mouse LMW-DSP3 at the amino acid level. The deduced protein had a single dual-specificity phosphatase catalytic domain, and lacked a cdc25 homology domain. LMW-DSP3 was expressed in the heart, lung, liver, and pancreas, and the expression level in the pancreas was highest. The LMW-DSP3 gene was located in human chromosome 2q32, and consisted of five exons spanning 21kb of human genomic DNA. LMW-DSP3 fused to GST showed phosphatase activity towards p-nitrophenyl phosphate which was optimal at pH 7.0 and 40 degrees C, and the activity was enhanced by Ca(2+) and Mn(2+). The phosphatase activity of LMW-DSP3 was inhibited by orthovanate. LMW-DSP3 showed phosphatase activity toward oligopeptides containing pSer/Thr and pTyr, indicating that LMW-DSP3 is a protein phosphatase with dual substrate specificity.