A role for the receptor-like protein tyrosine phosphatase alpha (PTPalpha) in regulating the kinase activity of Src family members has been proposed because ectopic expression of PTPalpha enhances the dephosphorylation and activation of Src and Fyn [1] [2] [3]. We have generated mice lacking catalytically active PTPalpha to address the question of whether PTPalpha is a physiological activator of Src and Fyn, and to investigate its other potential functions in the context of the whole animal. Mice homozygous for the targeted PTPalpha allele (PTPalpha-/-) and lacking detectable PTPalpha protein exhibited no gross phenotypic defects. The kinase activities of Src and Fyn were significantly reduced in PTPalpha-/- mouse brain and primary embryonic fibroblasts, and this correlated with enhanced phosphorylation of the carboxy-terminal regulatory Tyr527 of Src in PTPalpha-/- mice. Thus, PTPalpha is a physiological positive regulator of the tyrosine kinases Src and Fyn. Increased tyrosine phosphorylation of several unidentified proteins was also apparent in PTPalpha-/- mouse brain lysates. These may be PTPalpha substrates or downstream signaling proteins. Taken together, the results indicate that PTPalpha has a dual function as a positive and negative regulator of tyrosine phosphorylation events, increasing phosphotyrosyl proteins through activation of Src and Fyn, and directly or indirectly removing tyrosine phosphate from other unidentified proteins.