Neuropathy target esterase (NTE) plays critical roles in embryonic development and maintenance of peripheral axons. It is a secondary target of some organophosphorus toxicants including analogs of insecticides and chemical warfare agents. Although the mechanistic role of NTE in vivo is poorly defined, it is known to hydrolyze lysophosphatidylcholine (LPC) in vitro and may protect cell membranes from cytotoxic accumulation of LPC. To determine the cellular function of NTE, Neuro-2a and COS-7 cells were transfected with a full-length human NTE-containing plasmid yielding recombinant NTE (rNTE). We find the same inhibitor sensitivity and specificity profiles for rNTE assayed with LPC or phenyl valerate (a standard NTE substrate) and that this correlation extends to the LPC hydrolases of human brain, lymphocytes and erythrocytes. All of these LPC hydrolases are therefore very similar to each other in respect to a conserved inhibitor binding site conformation. NTE is expressed in brain and lymphocytes and contributes to LPC hydrolase activities in these tissues. The enzyme or enzymes responsible for erythrocyte LPC hydrolase activity remain to be identified. We also show that rNTE protects Neuro-2a and COS-7 cells from exogenous LPC cytotoxicity. Expression of rNTE in Neuro-2a cells alters their phospholipid balance (analyzed by liquid chromatography-mass spectrometry with single ion monitoring) by lowering LPC-16:0 and LPC-18:0 and elevating glycerophosphocholine without a change in phosphatidylcholine-16:0/18:1 or 16:0/18:2. NTE therefore serves an important function in LPC homeostasis and action.