Autotaxin (ATX) or nucleotide pyrophosphatase/phosphodiesterase 2 (NPP2) is an NPP family member that promotes tumor cell motility, experimental metastasis, and angiogenesis. ATX primarily functions as a lysophospholipase D, generating the lipid mediator lysophosphatidic acid (LPA) from lysophosphatidylcholine. ATX uses a single catalytic site for the hydrolysis of both lipid and non-lipid phosphodiesters, but its regulation is not well understood. Using a new fluorescence resonance energy transfer-based phosphodiesterase sensor that reports ATX activity with high sensitivity, we show here that ATX is potently and specifically inhibited by LPA and sphingosine 1-phosphate (S1P) in a mixed-type manner (Ki approximately 10(-7) M). The homologous ecto-phosphodiesterase NPP1, which lacks lysophospholipase D activity, is insensitive to LPA and S1P. Our results suggest that, by repressing ATX activity, LPA can regulate its own biosynthesis in the extracellular environment, and they reveal a novel role for S1P as an inhibitor of ATX, in addition to its well established role as a receptor ligand.