c-Src tyrosine kinase activity is elevated in several types of human cancer, and this has been attributed to elevated c-Src expression levels, increased c-Src specific activity, and activating mutations in c-Src. We have found a number of human breast cancer cell lines with elevated c-Src specific activity that also possess elevated phosphatase activity directed against the carboxyl-terminal negative regulatory domain of Src family kinases. To identify this phosphatase, cell extracts from MDA-MB-435S cells were chromatographed and the fractions were assayed for phosphatase activity. Four peaks of phosphatase activity directed against the nonspecific substrate poly(Glu/Tyr) were detected. One peak also dephosphorylated a peptide modeled against the c-Src carboxyl-terminal negative regulatory domain and intact human c-Src. Immunoblotting and immunodepletion experiments identified the phosphatase as protein-tyrosine phosphatase 1B (PTP1B). Examination of several human breast cancer cell lines with increased c-Src activity showed elevated levels of PTP1B protein relative to normal control breast cells. In vitro c-Src reactivation experiments confirmed the ability of PTP1B to dephosphorylate and activate c-Src. In vivo overexpression of PTP1B in 293 cells caused a 2-fold increase of endogenous c-Src kinase activity. Our findings indicate that PTP1B is the primary protein-tyrosine phosphatase capable of dephosphorylating c-Src in several human breast cancer cell lines and suggests a regulatory role for PTP1B in the control of c-Src kinase activity.