To clarify the role of protein tyrosine phosphatase (PTPase) containing a pair of Src homology 2 (SH2) regions upon insulin signaling, we studied the interactions between the insulin receptor and SH-PTP2 coupled to glutathione-S-transferase. A full length SH-PTP2 was phosphorylated by insulin receptor kinase and associated with the insulin receptor in vitro. The N-terminal SH2 domain was more phosphorylated than the other SH2 domain of SH-PTP2. However, both SH2 domains of SH-PTP2 were necessary for association with insulin receptors. Phosphorylation of the SH2 domains of SH-PTP2 resulted in decreased PTPase activities toward the phosphorylated insulin receptor. These results indicate that the insulin receptor can negatively regulate SH-PTP2 activity by means of phosphorylating the SH2 domains.