In a search for plant homologues of dipeptidyl peptidase III (DPP III) family, we found a predicted protein from the moss Physcomitrella patens (UniProt entry: A9TLP4), which shared 61% sequence identity with the Arabidopsis thaliana uncharacterized protein, designated Nudix hydrolase 3. Both proteins contained all conserved regions of the DPP III family, but instead of the characteristic hexapeptide HEXXGH zinc-binding motif, they possessed a pentapeptide HEXXH, and at the N-terminus, a Nudix box, a hallmark of Nudix hydrolases, known to act upon a variety of nucleoside diphosphate derivatives. To investigate their biochemical properties, we expressed heterologously and purified Physcomitrella (PpND) and Arabidopsis (AtND) protein. Both hydrolyzed, with comparable catalytic efficiency, the isopentenyl diphosphate (IPP), a universal precursor for the biosynthesis of isoprenoid compounds. In addition, PpND dephosphorylated four purine nucleotides (ADP, dGDP, dGTP, and 8-oxo-dATP) with strong preference for oxidized dATP. Furthermore, PpND and AtND showed DPP III activity against dipeptidyl-2-arylamide substrates, which they cleaved with different specificity. This is the first report of a dual activity enzyme, highly conserved in land plants, which catalyzes the hydrolysis of a peptide bond and of a phosphate bond, acting both as a dipeptidyl peptidase III and an atypical Nudix hydrolase.