The neurally active cytokine leukemia inhibitory factor (LIF) signals through a bipartite receptor complex composed of LIF receptor alpha (LIFR) and gp130. gp130 and LIFR contain consensus binding motifs for the protein tyrosine phosphatase SHP-2 surrounding tyrosines 118 and 115 (Y118 and Y115) of their cytoplasmic domains, respectively. These sites are necessary for maximal activation of mitogen-activated protein kinase (MAPK). Coexpression of catalytically inactive, but not wild-type, SHP-2 reduced LIFR- and gp130-mediated activation of MAPK up to 75%. Conversely, coexpression of the wild-type, but not catalytically inactive, SHP-1, a related phosphatase, reduced activity up to 80%, demonstrating that SHP-2 and SHP-1 have opposing effects on the MAPK pathway. Mutation of Y115 of the cytoplasmic domain of LIFR eliminates receptor-mediated tyrosine phosphorylation of SHP-2. In contrast, SHP-1 association with gp130 and LIFR is constitutive and independent of Y118 and Y115, respectively. SHP-1 has a positive regulatory role on LIF-stimulated vasoactive intestinal peptide (VIP) reporter gene expression in neuronal cells, whereas the effect of SHP-2 is negative. Furthermore, LIF-stimulated MAPK activation negatively regulates this VIP reporter gene induction. SHP-2 also negatively regulates LIF-dependent expression of choline acetyltransferase, but this regulation could be dissociated from its effects on MAPK activation. These data indicate that SHP-1 and SHP-2 are important regulators of LIF-dependent neuronal gene expression via both MAPK-dependent and -independent pathways.