The silent information regulator 2 (Sir2) family of NAD-dependent N-acetyl-protein deacetylases participates in the regulation of gene silencing, chromatin structure, and longevity. In the Sir2-catalyzed reaction, the acetyl moiety of N-acetyl-histone is transferred to the ADP-ribose of NAD, yielding O-acetyl-ADP-ribose and nicotinamide. We hypothesized that, if O-acetyl-ADP-ribose were an important signaling molecule, a specific hydrolase would cleave the (O-acetyl)-(ADP-ribose) linkage. We report here that the poly(ADP-ribose) glycohydrolase ARH3 hydrolyzed O-acetyl-ADP-ribose to produce ADP-ribose in a time- and Mg(2+)-dependent reaction and thus could participate in two signaling pathways. This O-acetyl-ADP-ribose hydrolase belongs to a family of three structurally related 39-kDa ADP-ribose-binding proteins (ARH1-ARH3). ARH1 was reported to hydrolyze ADP-ribosylarginine, whereas ARH3 degraded poly(ADP-ribose). ARH3-catalyzed generation of ADP-ribose from O-acetyl-ADP-ribose was significantly faster than from poly(ADP-ribose). Like the degradation of poly(ADP-ribose) by ARH3, hydrolysis of O-acetyl-ADP-ribose was abolished by replacement of the vicinal aspartates at positions 77 and 78 of ARH3 with asparagine. The rate of O-acetyl-ADP-ribose hydrolysis by recombinant ARH3 was 250-fold that observed with ARH1; ARH2 and poly(ADP-ribose) glycohydrolase were inactive. All data support the conclusion that the Sir2 reaction product O-acetyl-ADP-ribose is degraded by ARH3.