The extracellular signal-regulated protein kinase 2 (ERK2) plays a central role in cellular proliferation and differentiation. Full activation of ERK2 requires dual phosphorylation of Thr183 and Tyr185 in the activation loop. Tyr185 dephosphorylation by the hematopoietic protein-tyrosine phosphatase (HePTP) represents an important mechanism for down-regulating ERK2 activity. The bisphosphorylated ERK2 is a highly efficient substrate for HePTP with a kcat/Km of 2.6 x 10(6) m(-1) s(-1). In contrast, the kcat/Km values for the HePTP-catalyzed hydrolysis of Tyr(P) peptides are 3 orders of magnitude lower. To gain insight into the molecular basis for HePTP substrate specificity, we analyzed the effects of altering structural features unique to HePTP on the HePTP-catalyzed hydrolysis of p-nitrophenyl phosphate, Tyr(P) peptides, and its physiological substrate ERK2. Our results suggest that substrate specificity is conferred upon HePTP by both negative and positive selections. To avoid nonspecific tyrosine dephosphorylation, HePTP employs Thr106 in the substrate recognition loop as a key negative determinant to restrain its protein-tyrosine phosphatase activity. The extremely high efficiency and fidelity of ERK2 dephosphorylation by HePTP is achieved by a bipartite protein-protein interaction mechanism, in which docking interactions between the kinase interaction motif in HePTP and the common docking site in ERK2 promote the HePTP-catalyzed ERK2 dephosphorylation (approximately 20-fold increase in kcat/Km) by increasing the local substrate concentration, and second site interactions between the HePTP catalytic site and the ERK2 substrate-binding region enhance catalysis (approximately 20-fold increase in kcat/Km) by organizing the catalytic residues with respect to Tyr(P)185 for optimal phosphoryl transfer.