A 48-kDa human T-cell protein-tyrosine-phosphatase (TC.PTPase) and a truncated form missing an 11-kDa C-terminal segment (TC delta C11.PTPase) were expressed by using the baculovirus system and characterized after extensive purification. The full-length PTPase was restricted to the particulate fraction of the cells from which it could be released by a combination of salt and detergent. The enzyme was entirely specific for phosphotyrosine residues. It displayed a low level of activity toward phosphorylated, reduced, carboxamidomethylated, and maleylated lysozyme (RCML), but was 12 times more active toward phosphorylated myelin basic protein (MBP). By contrast, the 37-kDa form localized in the soluble fraction, and its activity toward RCML was 5 times higher than that observed with MBP. The autophosphorylated cytoplasmic domain of the EGF receptor served as substrate for both enzymes. Limited proteolysis of either protein gave rise to a 33-kDa fragment displaying the substrate specificity of the truncated form. These data lend further support to the view that the C-terminal segment of the T-cell PTPase serves a regulatory function, playing an important role in the localization and substrate specificity of the enzyme.