Immunocytochemical and biochemical studies were conducted to characterize a brain-specific protein tyrosine phosphatase, designated STEP for striatal enriched phosphatase. STEP immunoreactivity was most intense in select regions of the CNS receiving a dopaminergic input, and was localized to cell bodies, dendrites, and axonal processes. Western blot analyses of rat brain homogenates revealed a triplet of polypeptides with relative mobilities (M(r)) of 46 kDa, 37 kDa, and 33 kDa enriched within the striatum. Phase separation of protein homogenates by Triton X-114 extraction indicated that this triplet was enriched in soluble but not membrane fractions. Affinity-purified STEP fusion protein exhibited phosphatase activity while a mutated form of the STEP fusion protein (Cys300Ser) showed no demonstrable phosphatase activity.