The SH2 domain protein tyrosine phosphatases (PTPases) PTP1C and PTP1D were found associated with epidermal growth factor (EGF) receptor which was purified from A431 cell membranes by several steps of chromatography. Both PTPases also associated with the EGF receptor upon exposure of immunoprecipitated receptor to lysates of MCF7 mammary carcinoma cells. The associated PTPases had little activity toward the bound receptor when it was autophosphorylated in vitro. Receptor dephosphorylation could, however, be initiated by treatment of the receptor-PTPase complex with phosphatidic acid (PA). When autophosphorylated EGF receptor was exposed to lysates of PTP1C or PTP1D overexpressing 293 cells, the association of PTP1C but not of PTP1D was enhanced in the presence of PA. In intact A431 cells, an association of PTP1C and PTP1D with the EGF receptor was detectable by coimmunoprecipitation experiments. PA treatment reduced the phosphorylation state of ligand activated EGF receptors in A431 cells and in 293 cells overexpressing EGF receptors together with PTP1C but not in 293 cells overexpressing EGF receptors alone or together with PTP1D. We conclude that PTP1C but not PTP1D participates in dephosphorylation of activated EGF receptors. A possible role of PA for physiological modulation of EGF receptor signaling is discussed.