Mitochondrial proteins are replete with phosphorylation, yet its functional relevance remains largely unclear. The presence of multiple resident mitochondrial phosphatases, however, suggests that protein dephosphorylation may be broadly important for calibrating mitochondrial activities. To explore this, we deleted the poorly characterized matrix phosphatase Pptc7 from mice using CRISPR-Cas9 technology. Strikingly, Pptc7−/− mice exhibit hypoketotic hypoglycemia, elevated acylcarnitines and serum lactate, and die soon after birth. Pptc7−/− tissues have markedly diminished mitochondrial size and protein content despite normal transcript levels, and aberrantly elevated phosphorylation on select mitochondrial proteins. Among these, we identify the protein translocase complex subunit Timm50 as a putative Pptc7 substrate whose phosphorylation reduces import activity. We further find that phosphorylation within or near the mitochondrial targeting sequences of multiple proteins could disrupt their import rates and matrix processing. Overall, our data define Pptc7 as a protein phosphatase essential for proper mitochondrial function and biogenesis during the extrauterine transition.