A method for the rapid identification of high-affinity ligands to Src homology-2 (SH2) domains is reported. A phosphotyrosyl (pY) peptide library containing completely randomized residues at positions -2 to +3 relative to the pY was synthesized on TentaGel resin, with a unique peptide sequence on each resin bead (total 2.5 x 10(6) different sequences). The library was screened against the biotinylated N- and C-terminal SH2 domains of protein tyrosine phosphatase SHP-1, and the beads that carry high-affinity ligands of the SH2 domains were identified using an enzyme-linked assay involving a streptavidin-alkaline phosphatase conjugate. Peptide ladder sequencing of the selected beads using matrix-assisted laser desorption ionization mass spectrometry revealed consensus sequences for both SH2 domains. The N-terminal SH2 domain strongly selects for peptides with a leucine at the -2 position; at the C-terminal side of the pY residue, it can recognize two distinct classes of peptides with consensus sequences of LXpY(M/F)X(F/M) and LXpYAXL (X = any amino acid), respectively. The C-terminal SH2 domain exhibits almost exclusive selectivity for peptides of the consensus sequence, (V/I/L)XpYAX(L/V). Several representative sequences selected from the library were individually synthesized and tested for binding to the SH2 domains by surface plasmon resonance and for their ability to stimulate the catalytic activity of SHP-1. Both experiments have demonstrated that the selected peptides are capable of binding to the SH2 domains with dissociation constants (K(D)) in the low micromolar range.