The cytoplasmic tyrosine phosphatase SHP1 has been shown to inhibit the oncogenic fusion protein nucleophosmin (NPM)-anaplastic lymphoma kinase (ALK), and loss of SHP1 contributes to NPM-ALK-mediated tumorigenesis. In this study, we aimed to further understand how SHP1 interacts and regulates NPM-ALK. We employed an in vitro model in which GP293 cells were transfected with various combinations of NPM-ALK (or mutants) and SHP1 (or mutants) expression vectors. We found that SHP1 co-immunoprecipitated with NPM-ALK, but not the enzymatically inactive NPM-ALK(K210R) mutant, or the mutant in which all three functionally important tyrosine residues (namely, Tyr(338), Tyr(342), and Tyr(343)) in the kinase activation loop (KAL) of ALK were mutated. Interestingly, whereas mutation of Tyr(338) or Tyr(342) did not result in any substantial change in the NPM-ALK/SHP1 binding (assessed by co-immunoprecipitation), mutation of Tyr(343) abrogated this interaction. Furthermore, the NPM-ALK/SHP1 binding was readily detectable when each of the remaining 8 tyrosine residues known to be phosphorylated were mutated. Although the expression of SHP1 effectively reduced the level of tyrosine phosphorylation of NPM-ALK, it did not affect that of the NPM-ALK(Y343F) mutant. In soft agar clonogenic assay, SHP1 expression significantly reduced the tumorigenicity of NPM-ALK but not that of NPM-ALK(Y343F). In conclusion, we identified Tyr(343) of NPM-ALK as the crucial site for mediating the NPM-ALK/SHP1 interaction. Our results also support the notion that the tumor suppressor effects of SHP1 on NPM-ALK are dependent on its ability to bind to this oncogenic protein.