Streptococcus pneumoniae is a major human pathogen and many interactions of this bacterium with its host appear to be mediated, directly or indirectly, by components of the bacterial cell wall, specifically by the phosphorylcholine residues which serve as anchors for surface‐located choline‐binding proteins and are also recognized by components of the host response, such as the human C‐reactive protein, a class of myeloma proteins and PAF receptors. In the present study, we describe the identification of the pneumococcal pce gene encoding for a teichoic acid phosphorylcholine esterase (Pce), an enzymatic activity capable of removing phosphorylcholine residues from the cell wall teichoic acid and lipoteichoic acid. Pce carries an N‐terminal signal sequence, contains a C‐terminal choline‐binding domain with 10 homologous repeating units similar to those found in other pneumococcal surface proteins, and the catalytic (phosphorylcholine esterase) activity is localized on the N‐terminal part of the protein. The mature protein was overexpressed in Escherichia coli and purified in a one‐step procedure by choline‐affinity chromatography and the enzymatic activity was followed using the chromophoric p‐nitrophenyl‐phosphorylcholine as a model substrate. The product of the enzymatic digestion of ³H‐choline‐labelled cell walls was shown to be phosphorylcholine. Inactivation of the pce gene in S. pneumoniae strains by insertion‐duplication mutagenesis caused a unique change in colony morphology and a striking increase in virulence in the intraperitoneal mouse model. Pce may be a regulatory element involved with the interaction of S. pneumoniae with its human host.