We determined the substrate specificities of the protein tyrosine phosphatases (PTPs) PTP1B, RPTPα, SHP-1, and SHP-2 by on-bead screening of combinatorial peptide libraries and solution-phase kinetic analysis of individually synthesized phosphotyrosyl (pY) peptides. These PTPs exhibit different levels of sequence specificity and catalytic efficiency. The catalytic domain of RPTPα has very weak sequence specificity and is approximately 2 orders of magnitude less active than the other three PTPs. The PTP1B catalytic domain has modest preference for acidic residues on both sides of pY, is highly active toward multiply phosphorylated peptides, but disfavors basic residues at any position, a Gly at the pY-1 position, or a Pro at the pY+1 position. By contrast, SHP-1 and SHP-2 share similar but much narrower substrate specificities, with a strong preference for acidic and aromatic hydrophobic amino acids on both sides of the pY residue. An efficient SHP-1/2 substrate generally contains two or more acidic residues on the N-terminal side and one or more acidic residues on the C-terminal side of pY but no basic residues. Subtle differences exist between SHP-1 and SHP-2 in that SHP-1 has a stronger preference for acidic residues at the pY-1 and pY+1 positions and the two SHPs prefer acidic residues at different positions N-terminal to pY. A survey of the known protein substrates of PTP1B, SHP-1, and SHP-2 shows an excellent agreement between the in vivo dephosphorylation pattern and the in vitro specificity profiles derived from library screening. These results suggest that different PTPs have distinct sequence specificity profiles and the intrinsic activity/specificity of the PTP domain is an important determinant of the enzyme's in vivo substrate specificity.