Lysosomal 5'->3' exonuclease that functions in nucleic-acid sensing by immune cells. Hydrolyzes phosphodiester bond in single- stranded RNA and DNA molecules, with a higher efficiency for molecules with 5' uridine and guanosine residues. It can stall at certain sites and does not necessarily proceed to complete exonucleolytic degradation, thereby producing nucleoside 3'-monophosphates but also 5'-end 5'-hydroxy deoxyribonucleotide/ribonucleotide fragments (PubMed:30111894, PubMed:34620855, PubMed:38537643, PubMed:38697119, PubMed:40931063). Through the processing of self and exogenous RNA and DNA molecules, provides molecular signals to toll-like receptors (TLRs) in innate immunity. Partially redundant with PLD3, it cooperates with the RNase T2/RNASET2 to generate 2',3'-cGMP and cytidine-rich RNA fragments that occupy the two TLR7 ligand-binding pockets, to trigger receptor activation and signaling (PubMed:38697119). Can exert polynucleotide phosphatase activity toward 5'-phosphorylated single- stranded DNA substrates although at a slow rate (PubMed:38537643). Could play a role in phagocytosis of activated microglia (By similarity). {ECO:0000250|UniProtKB:Q8BG07, ECO:0000269|PubMed:30111894, ECO:0000269|PubMed:34620855, ECO:0000269|PubMed:38537643, ECO:0000269|PubMed:38697119, ECO:0000269|PubMed:40931063}. Can alternatively catalyze the transfer (transphosphatidylation) of a glycerol group between (S,R)- lysophosphatidylglycerol (LPG) and monoacylglycerol (MAG). The reaction is characterized by an R-to-S stereo-inversion which is essential for the resistance of the produced (S,S)-bis(monoacylglycero)phosphates (BMPs) to lysosomal degradation. The resulting BMPs, are phospholipids required for the formation of lysosomal intralumenal vesicles (ILVs) where lipid degradation can occur. . This is the function of PLD4 (phospholipase D family member 4, ENSG00000166428).