Because the protein-tyrosine phosphatase (PTP) Syp associates with the tyrosine-phosphorylated platelet-derived growth factor beta receptor (beta PDGFR), the beta PDGFR is a likely Syp substrate. We tested this hypothesis by determining whether recombinant Syp (rSyp) and a control PTP, recombinant PTP1B (rPTP1B), were able to dephosphorylate the beta PDGFR. The beta PDGFR was phosphorylated at multiple tyrosine residues in an in vitro kinase assay and then incubated with increasing concentrations of rSyp or rPTP1B. While the receptor was nearly completely dephosphorylated by high concentrations of rPTP1B, receptor dephosphorylation by rSyp plateaued at approximately 50%. Two-dimensional phosphopeptide maps of the beta PDGFR demonstrated that rSyp displayed a clear preference for certain receptor phosphorylation sites; the most efficiently dephosphorylated sites were phosphotyrosines (Tyr(P)-771 and -751, followed by Tyr(P)740, while Tyr(P)-1021 and Tyr(P)-1009 were very poor substrates. In contrast, rPTP1B displayed no selectivity for the various rPTP1B displayed no selectivity for the various beta PDGFR tyrosine phosphorylation sites and dephosphorylated all of them with comparable efficiency. A Syp construct that lacked the SH2 domains was still able to discriminate between the various receptor phosphorylation sites, although less effectively than full-length Syp. These in vitro studies predicted that Syp can dephosphorylate the receptor in vivo. Indeed, we found that a beta PDGFR mutant (F1009) that associates poorly with Syp, had a much slower in vivo rate of receptor dephosphorylation than the wild type receptor. In addition, the GTPase-activating protein of Ras (GAP) and phosphatidylinositol 3-kinase were less stably associated with the wild type beta PDGFR than with the F1009 receptor. These findings are consistent with the in vitro experiments showign that Syp prefers to dephosphorylate sites on the beta PDGFR, that are important for binding phosphatidylinositol 3-kinase (Tyr(P)-740 and Tyr(P)-751) and GAP (Tyr(P)-771). These studies reveal that Syp is a substrate-selective PTP and that both the catalytic domain and the SH2 domains contribute to Syp's ability to choose substrates. Furthermore, it appears that Syp plays a role in PDGF-dependent intracellular signal relay by selectively dephosphorylating the beta PDGFR and thereby regulating the binding of a distinct group of receptor-associated signal relay enzymes.