Engagement of beta1 integrin receptors initiates an increase in intracellular calcium concentrations in T cells, potentially affecting calcium-sensitive signaling pathways. The calcium-activated cysteine protease, calpain, regulates a variety of cell functions by calcium-dependent limited proteolysis. To investigate the function of calpain in T cells, we sought to determine the role of this protease in calcium-dependent signaling events. Subsequent to elevations in intracellular calcium concentrations induced by ionomycin or adherence to fibronectin, calpain activity translocated to the cytoskeletal/membrane fraction of T cells. In addition, stimulation of T cells with these agents initiated the proteolytic cleavage of protein tyrosine phosphatase 1B by calpain. Enzymatic cleavage of protein tyrosine phosphatase 1B occurs near the endoplasmic reticulum-targeting sequence and results in the generation of an enzymatically active form of the phosphatase. Furthermore, we show that both the native and the cleaved forms of protein tyrosine phosphatase 1B interact with p130(Cas) in T cells. This interaction may serve to relocate protein tyrosine phosphatase 1B to sites of focal contact resulting in potential interactions with substrates previously inaccessible to the endoplasmic reticulum-associated phosphatase. Thus, we describe a novel calcium-dependent signaling pathway in T cells that may mediate signals generated by beta1 integrin adherence to the extracellular matrix.