Protein tyrosine phosphorylation is thought to be important for regulation of the proliferation, differentiation, and rapid turnover of intestinal epithelial cells (IECs). The role of protein tyrosine phosphatases in such homeostatic regulation of IECs has remained largely unknown, however. Src homology 2-containing protein tyrosine phosphatase (Shp2) is a ubiquitously expressed cytoplasmic protein tyrosine phosphatase that functions as a positive regulator of the Ras-mitogen-activated protein kinase (MAPK) signaling pathway operative downstream of the receptors for various growth factors and cytokines, and it is thereby thought to contribute to the regulation of cell proliferation and differentiation. We now show that mice lacking Shp2 specifically in IECs (Shp2 CKO mice) develop severe colitis and die as early as 3 to 4 weeks after birth. The number of goblet cells in both the small intestine and colon of Shp2 CKO mice was markedly reduced compared with that for control mice. Furthermore, Shp2 CKO mice showed marked impairment of both IEC migration along the crypt-villus axis in the small intestine and the development of intestinal organoids from isolated crypts. The colitis as well as the reduction in the number of goblet cells apparent in Shp2 CKO mice were normalized by expression of an activated form of K-Ras in IECs. Our results thus suggest that Shp2 regulates IEC homeostasis through activation of Ras and thereby protects against the development of colitis.