The protein tyrosine kinase (PTK) receptors and cytosolic signaling proteins as well as the protein tyrosine phosphatases (PTPs) have important roles in regulation of growth of the benign and malignant prostate gland. Here, we studied expression of the protein tyrosine phosphatase SHP-1 in prostate cancer cell lines and in human prostatic tissues. SHP-1 is expressed at a high level in LNCaP prostate cancer cells compared with PC3 cells. Silencing of SHP-1 expression with siRNA in LNCaP cells led to an increased rate of proliferation, whereas overexpression of SHP-1 by means of transient and stable transfection in PC3 cells led to a decrease in proliferation. Corresponding changes were observed in cyclin D1 expression. We further demonstrate that LNCaP and PC3 cells respond differently to IL-6 stimulation. SHP-1 overexpression in PC3 cells reversed IL-6 stimulation of proliferation, whereas in SHP-1-silenced LNCaP cells, IL-6 inhibition of proliferation was not affected. In addition, IL-6 treatment led to higher levels of phosphorylated STAT3 in SHP-1-silenced LNCaP cells than in control cells. Next, SHP-1 expression in human prostate cancer was analyzed by immunohistochemical staining of tissue microarrays comprising tumor specimens from 100 prostate cancer patients. We found an inverse correlation between the tumor level of SHP-1 expression and time to biochemical recurrence and clinical progression among prostate cancer patients. In conclusion, our results suggest that a decreased level of SHP-1 expression in prostate cancer cells is associated with a high proliferation rate and an increased risk of recurrence or clinical progression after radical prostatectomy for localized prostate cancer.