We have characterized the strongly homologous GPP1/RHR2 and GPP2/HOR2 genes, encoding isoforms of glycerol 3-phosphatase. Mutants lacking both GPP1 and GPP2 are devoid of glycerol 3-phosphatase activity and produce only a small amount of glycerol, confirming the essential role for this enzyme in glycerol biosynthesis. Overproduction of Gpp1p and Gpp2p did not significantly enhance glycerol production, indicating that glycerol phosphatase is not rate-limiting for glycerol production. Previous studies have shown that expression of both GPP1 and GPP2 is induced under hyperosmotic stress and that induction partially depends on the HOG (high osmolarity glycerol) pathway. We here show that expression of GPP1 is strongly decreased in strains having low protein kinase A activity, although it is still responsive to osmotic stress. The gpp1Delta/gpp2Delta double mutant is hypersensitive to high osmolarity, whereas the single mutants remain unaffected, indicating GPP1 and GPP2 substitute well for each other. Transfer to anaerobic conditions does not affect expression of GPP2, whereas GPP1 is transiently induced, and mutants lacking GPP1 show poor anaerobic growth. All gpp mutants show increased levels of glycerol 3-phosphate, which is especially pronounced when gpp1Delta and gpp1Delta/gpp2Delta mutants are transferred to anaerobic conditions. The addition of acetaldehyde, a strong oxidizer of NADH, leads to decreased glycerol 3-phosphate levels and restored anaerobic growth of the gpp1Delta/gpp2Delta mutant, indicating that the anaerobic accumulation of NADH causes glycerol 3-phosphate to reach growth-inhibiting levels. We also found the gpp1Delta/gpp2Delta mutant is hypersensitive to the superoxide anion generator, paraquat. Consistent with a role for glycerol 3-phosphatase in protection against oxidative stress, expression of GPP2 is induced in the presence of paraquat. This induction was only marginally affected by the general stress-response transcriptional factors Msn2p/4p or protein kinase A activity. We conclude that glycerol metabolism plays multiple roles in yeast adaptation to altered growth conditions, explaining the complex regulation of glycerol biosynthesis genes.