Leptin exerts its weight-reducing effects by binding to its receptor and activating signal transduction in hypothalamic neurons and other cell types. To identify the components of the leptin signal transduction pathway, an approach was developed in which bacterially expressed phosphorylated fragments of Ob receptor b (Ob-Rb) were used as affinity agents. Leptin binding to the Ob-Rb form of the leptin receptor leads to tyrosyl phosphorylation of the cytoplasmic domain of its receptor. Two of the three cytoplasmic tyrosines of Ob-Rb, at positions 985 and 1138, are phosphorylated after leptin treatment. Affinity chromatography using a tyrosine-phosphorylated fragment spanning Tyr 985 of Ob-Rb was used to identify proteins that bind to this site. The SH2 domain containing protein tyrosine phosphatase 2 (SHP-2) was isolated from bovine and mouse hypothalamus by using this method. After cotransfection of Ob-Rb, Janus kinase 2 (JAK2), and SHP-2 into 293T cells, leptin results in direct binding of SHP-2 to the phosphorylated Tyr 985. The bound SHP-2 is itself tyrosine phosphorylated after leptin treatment. SHP-2 is not phosphorylated after leptin treatment when a Y-->F 985 receptor mutant is cotransfected. In the absence of SHP-2 phosphorylation, the level of JAK2 phosphorylation was increased. Tyrosyl phosphorylation of the leptin receptor and signal transducer and activater of transcription 3 (STAT3) are not affected by phosphorylation of SHP-2. These data suggest that activation of SHP-2 by the leptin receptor results in a decreased phosphorylation of JAK2 and may act to attenuate leptin signal transduction. The method used in this report can in principle be used to isolate additional components of the leptin, or other, signal transduction pathway.