The product of the open reading frame YPL206c, Pgc1p, of the yeast Saccharomyces cerevisiae displays homology to bacterial and mammalian glycerophosphodiester phosphodiesterases. Deletion of PGC1 causes an accumulation of the anionic phospholipid, phosphatidylglycerol (PG), especially under conditions of inositol limitation. This PG accumulation was not caused by increased production of phosphatidyl-glycerol phosphate or by decreased consumption of PG in the formation of cardiolipin, the end product of the pathway. PG accumulation in the pgc1Delta strain was caused rather by inactivation of the PG degradation pathway. Our data demonstrate an existence of a novel regulatory mechanism in the cardiolipin biosynthetic pathway in which Pgc1p is required for the removal of excess PG via a phospholipase C-type degradation mechanism.