The phosphorylation and dephosphorylation of proteins on tyrosyl residues are key regulatory mechanisms in T-cell signal transduction and are controlled by the opposing activities of protein tyrosine kinases and phosphotyrosyl phosphatases (PTPs). In T cells, several nontransmembrane protein tyrosine kinases are associated with receptors; for example, Lck is bound to the coreceptors CD4 and CD8 and becomes activated upon their stimulation. In comparison, little is known about the role of nontransmembrane PTPs in early T-cell signaling. SH-PTP1 (PTP1C, HCP, SHP) is a nontransmembrane PTP expressed primarily in hematopoietic cells, including T cells. We have found that SH-PTP1 is basally phosphorylated on serine in resting T cells. Upon stimulation of CD4 or CD8 either in a T-cell hybridoma cell line or in primary thymocytes, SH-PTP1 becomes tyrosyl phosphorylated. Moreover, SH-PTP1 is constitutively phosphorylated on tyrosine in the Lck- overexpressing lymphoma cell line LSTRA. SH-PTP1 is also a good substrate for recombinant Lck in vitro. Comparisons of the tryptic phosphopeptide maps of wild-type SH-PTP1 and deletion and point mutations establish that the two sites (Y-536 and Y-564) which are directly phosphorylated by Lck in vitro are also phosphorylated in vivo in LSTRA cells. One of these sites (Y-564) is phosphorylated in T cells in response to Lck activation. We conclude that SH- PTP1 undergoes Lck-dependent tyrosyl phosphorylation in T cells and likely plays a role in early T-cell signaling.