Signal transduction of FMS-like tyrosine kinase 3 (FLT3) is regulated by protein-tyrosine phosphatases (PTPs). We recently identified the PTP DEP-1/CD148/PTPRJ as a novel negative regulator of FLT3. This study addressed the role of DEP-1 for regulation of the acute myeloid leukemia (AML)-related mutant FLT3 internal tandem duplication (ITD) protein. Our experiments revealed that DEP-1 was expressed but dysfunctional in cells transformed by FLT3 ITD. This was caused by enzymatic inactivation of DEP-1 through oxidation of the DEP-1 catalytic cysteine. In intact cells, including primary AML cells, FLT3 ITD kinase inhibition reactivated DEP-1. DEP-1 reactivation was also achieved by counteracting the high levels of reactive oxygen species (ROS) production detected in FLT3 ITD-expressing cell lines by inhibition of reduced NAD phosphate (NADPH)-oxidases, or by overexpression of catalase or peroxiredoxin-1 (Prx-1). Interference with ROS production in 32D cells inhibited cell transformation by FLT3 ITD in a DEP-1-dependent manner, because RNAi-mediated depletion of DEP-1 partially abrogated the inhibitory effect of ROS quenching. Reactivation of DEP-1 by stable overexpression of Prx-1 extended survival of mice in the 32D cell/C3H/HeJ mouse model of FLT3 ITD-driven myeloproliferative disease. The study thus uncovered DEP-1 oxidation as a novel event contributing to cell transformation by FLT3 ITD.