The low-molecular-weight phosphatase activity of the calmodulin-activated protein phosphatase, calcineurin, has been investigated as a model reaction for the dephosphorylation of phosphotyrosyl residues. The substrate specificity, kinetic mechanism, and chemical mechanism have been studied via kinetic means. Calcineurin is found to dephosphorylate aryl phosphate esters with a nonconstant maximal velocity, in contrast to the situation observed with the nonspecific acid and alkaline phosphatases from various sources. Product inhibition kinetics demonstrated that the kinetic mechanism of calcineurin is a random uni-bi. Calcineurin failed to show phosphotransferase activity with two acceptors functional with the nonspecific acid and alkaline phosphatases. The simplest model consistent with these results does not invoke the generation of a phosphoryl-enzyme intermediate in the reaction pathway of calcineurin, but involves the direct transfer of the phosphoryl group to the acceptor water molecule. The dependency of the kinetic parameters upon pH provides evidence for the existence of two ionizing groups important for catalytic capability. Application of sulfate analogs of the substrate and product and results of metal ion substitution experiments suggest that the metal ion necessary for calcineurin activity may be important in the binding of substrate. Further, the metal ion may be serving a catalytic role by activating the water molecule for hydrolysis of the ester. The specificity of calcineurin is observed to be dependent upon the pK(,a) of the phenolic leaving group. Comparison to chemical reactions of phosphate esters provides insight into the chemistry of the enzymatic process. Specifically, calcineurin is postulated to provide electrophilic assistance to the attack on the phosphate ester. The pH dependence suggests that the dianionic form of the substrate is the preferred substrate. The enzyme, then, supplies electrophilic assistance to the direct hydrolysis of the dianion phosphate ester which has been coordinated to the water (hydroxyl) molecule by the required metal ion.