Intact rat liver mitochondria have very low hydrolytic activity, if any, toward exogenous pyrophosphate. The activity can be unmasked by making mitochondria permeable to PPi by toluene treatment or disrupting them with detergents or ultrasound, indicating that the active site of pyrophosphatase is located in the matrix. Initial rates of PPi hydrolysis by toluene-permeabilized mitochondria and purified pyrophosphatase were found to depend in a similar manner on PPi and Mg2+ concentrations. The simplest model consistent with the data in both cases implies that the reaction proceeds through two pathways and requires MgPPi as the substrate and, at least, one Mg2+ ion as the activator. In the presence of 0.4 mM Mg2+ (physiological concentration), the inhibition constant for Ca2+ is 12 microM and the enzyme activity is, at least, 50% maximal. The results suggest that the activity of pyrophosphatase in mitochondria is high enough to keep free PPi concentration at a level close to that at equilibrium.