SHP-2 tyrosine phosphatase is highly expressed in hematopoietic cells; however, the function of SHP-2 in hematopoietic cell processes is not fully understood. Recent identification of SHP-2 mutations in childhood leukemia further emphasizes the importance of SHP-2 regulation in hematopoietic cells. We previously reported that SHP-2 played a positive role in IL-3-induced activation of Jak2 kinase in a catalytic-dependent manner. Interestingly, enforced expression of wild-type (WT) SHP-2 in Ba/F3 cells enhanced growth factor deprivation-induced apoptosis. Biochemical analyses revealed that although IL-3 activation of Jak2 kinase was increased, tyrosyl phosphorylation of its downstream substrate STAT5 was disproportionately decreased by the overexpression of SHP-2. Following IL-3 deprivation, the tyrosyl phosphorylation of STAT5 that is required for its antiapoptotic activity was rapidly diminished in SHP-2 overexpressing cells. As a result, reduction of the putative downstream targets of STAT5-Bcl-X(L) and pim-1 was accelerated by overexpression of SHP-2. Further investigation showed that SHP-2 associated with STAT5, and that it was indeed able to dephosphorylate STAT5. Finally, overexpression of SHP-2 in primary bone marrow hematopoietic progenitor cells compromised their differentiative and proliferative potential, and enhanced growth factor withdrawal-induced cell death. And, the effect of SHP-2 overexpression on growth factor-dependent survival was diminished in STAT5-deficient hematopoietic cells. Taken together, these results suggest that SHP-2 tyrosine phosphatase negatively regulates hematopoietic cell survival by dephosphorylation of STAT5.