Proteins belonging to the DHH family, a member of the phosphoesterase superfamily, are produced by most bacterial species. While some of these proteins are well studied in Bacillus subtilis and Escherichia coli, their functions in Streptococcus pneumoniae remain unclear. Recently, the highly conserved DHH subfamily 1 protein PapP (SP1298) has been reported to play an important role in virulence. Here, we provide a plausible explanation for the attenuated virulence of the papP mutant. Recombinant PapP specifically hydrolyzed nucleotides 3′-phosphoadenosine-5′-phosphate (pAp) and 5′-phosphoadenylyl-(3′−>5′)-adenosine (pApA). Deletion of papP, potentially leading to pAp/pApA accumulation, resulted in morphological defects and mis-localization of several cell division proteins. Incubation with both polar solvent and detergent led to robust killing of the papP mutant, indicating that membrane integrity is strongly affected. This is in line with previous studies showing that pAp inhibits the ACP synthase, an essential enzyme involved in lipid precursor production. Remarkably, partial inactivation of the lipid biosynthesis pathway, by inhibition of FabF or depletion of FabH, phenocopied the papP mutant. We conclude that pAp and pApA phosphatase activity of PapP is required for maintenance of membrane lipid homeostasis providing an explanation how inactivation of this protein may attenuate pneumococcal virulence.