PTPN22 is a tyrosine phosphatase and functions as a damper of TCR signals. A C-to-T single nucleotide polymorphism (SNP) located at position 1858 of human PTPN22 cDNA and converting an arginine (R620) to tryptophan (W620) confers the highest risk of rheumatoid arthritis among non-HLA genetic variations that are known to be associated with this disease. The effect of the R-to-W conversion on the phosphatase activity of PTPN22 protein and the impact of the minor T allele of the C1858T SNP on the activation of T cells has remained controversial. In addition, how the overall activity of PTPN22 is regulated and how the R-to-W conversion contributes to rheumatoid arthritis is still poorly understood. Here we report the identification of an alternative splice form of human PTPN22, namely PTPN22.6. It lacks the nearly entire phosphatase domain and can function as a dominant negative isoform of the full length PTPN22. Although conversion of R620 to W620 in the context of PTPN22.1 attenuated T cell activation, expression of the tryptophan variant of PTPN22.6 reciprocally led to hyperactivation of human T cells. More importantly, the level of PTPN22.6 in peripheral blood correlates with disease activity of rheumatoid arthritis. Our data depict a model that can reconcile the conflicting observations on the functional impact of the C1858T SNP and also suggest that PTPN22.6 is a novel biomarker of rheumatoid arthritis.