Intestinal alkaline phosphatase (IAP) plays an essential role in intestinal homeostasis and health through interactions with the resident microbiota, diet and the gut. IAP’s role in the intestine is to dephosphorylate toxic microbial ligands such as lipopolysaccharides, unmethylated cytosine-guanosine dinucleotides and flagellin as well as extracellular nucleotides such as uridine diphosphate. IAP’s ability to detoxify these ligands is essential in protecting the host from sepsis during acute inflammation and chronic inflammatory conditions such as inflammatory bowel disease. Also important in these complications is IAP’s ability to regulate the microbial ecosystem by forming a complex relationship between microbiota, diet and the intestinal mucosal surface. Evidence reveals that diet alters IAP expression and activity and this in turn can influence the gut microbiota and homeostasis. IAP’s ability to maintain a healthy gastrointestinal tract has accelerated research on its potential use as a therapeutic agent against a multitude of diseases. Exogenous IAP has been shown to have beneficial effects when administered during ulcerative colitis, coronary bypass surgery and sepsis. There are currently a handful of human clinical trials underway investigating the effects of exogenous IAP during sepsis, rheumatoid arthritis and heart surgery. In light of these findings IAP has been marked as a novel agent to help treat a variety of other inflammatory and infectious diseases. The purpose of this review is to highlight the essential characteristics of IAP in protection and maintenance of intestinal homeostasis while addressing the intricate interplay between IAP, diet, microbiota and the intestinal epithelium.