Myotubularins, a large family of catalytically active and inactive proteins, 
belong to a unique subgroup of protein tyrosine phosphatases that use inositol 
phospholipids, rather than phosphoproteins, as physiological substrates. Here, 
by integrating crystallographic and deuterium-exchange mass spectrometry studies 
of human myotubularin-related protein-2 (MTMR2) in complex with 
phosphoinositides, we define the molecular basis for this unique substrate 
specificity. Phosphoinositide substrates bind in a pocket located on a 
positively charged face of the protein, suggesting an electrostatic mechanism 
for membrane targeting. A flexible, hydrophobic helix makes extensive 
interactions with the diacylglycerol moieties of substrates, explaining the 
specificity for membrane-bound phosphoinositides. An extensive H-bonding network 
and charge-charge interactions within the active site pocket determine 
phosphoinositide headgroup specificity. The conservation of these specificity 
determinants within the active, but not the inactive, myotubularins provides 
insight into the functional differences between the active and inactive members.