Human phosphoserine phosphatase (HPSP) regulates the levels of glycine and d-serine, the putative co-agonists for the glycine site of the NMDA receptor in the brain. Here, we describe the first crystal structures of the HPSP in complexes with the competitive inhibitor 2-amino-3-phosphonopropionic acid (AP3) at 2.5 A, and the phosphate ion (Pi) and the product uncompetitive inhibitor l-serine (HPSP.l-Ser.Pi) at 2.8 A. The complex structures reveal that the open-closed environmental change of the active site, generated by local rearrangement of the alpha-helical bundle domain, is important to substrate recognition and hydrolysis. The maximal extent of this structural rearrangement is shown to be about 13 A at the L4 loop and about 25 degrees at the helix alpha3. Both the structural change and mutagenesis data suggest that Arg-65 and Glu-29 play an important role in the binding of the substrate. Interestingly, the AP3 binding mode turns out to be significantly different from that of the natural substrate, phospho-l-serine, and the HPSP.l-Ser.Pi structure provides a structural basis for the feedback control mechanism of serine. These analyses allow us to provide a clear model for the mechanism of HPSP and a framework for structure-based drug development.