The guanine nucleotide exchange factor, C3G (RapGEF1), functions in multiple signaling pathways involved in cell adhesion, proliferation, apoptosis and actin reorganization. C3G is regulated by tyrosine phosphorylation on Y504, known to be mediated by c-Abl and Src family kinases. In the present study we explored the possibility of cellular phospho-C3G (pC3G) being a substrate of the intracellular T-cell protein tyrosine phosphatase TC-PTP (PTPN2) using the human neuroblastoma cell line, IMR-32. In vivo and in vitro binding assays demonstrated interaction between C3G and TC-PTP. Interaction is mediated through the Crk-binding region of C3G and C-terminal noncatalytic residues of TC-PTP. C3G interacted better with a substrate trap mutant of TC48 and this complex formation was inhibited by vanadate. Endogenous pC3G colocalized with catalytically inactive mutant TC48 in the Golgi. Expression of TC48 abrogated pervanadate and c-Src induced phosphorylation of C3G without affecting total cellular phospho-tyrosine. Insulin-like growth factor treatment of c-Src expressing cells resulted in dephosphorylation of C3G dependent on the activity of endogenous TC48. TC48 expression inhibited forskolin induced tyrosine phosphorylation of C3G and neurite outgrowth in IMR-32 cells. Our results identify a novel Golgi localized substrate of TC48 and delineate a role for TC48 in dephosphorylation of substrates required during differentiation of human neuroblastoma cells.