Much progress has been made in elucidating early events in signal transduction by growth factor receptors with intrinsic tyrosine kinase activity. Upon ligand addition, these receptors dimerize and activate, becoming phosphorylated at a number of tyrosyl residues. These phosphorylation sites serve as docking points for proteins containing src homology-2 (SH2) domains. However, little is known about how phosphotyrosine phosphatases (PTPs), participate in these events. Recently, we and others molecularly cloned a ubiquitously expressed SH2 domain-containing PTP, SH-PTP2 (Syp, PTP1D, PTP2C), and found that it interacts directly with several activated growth factor receptors via its SH2 domains. Using a peptide competition assay, we now demonstrate that the major binding site for SH-PTP2 on the platelet-derived growth factor receptor is phosphotyrosine 1009. Immunoprecipitation studies indicate that SH-PTP2 is the previously unidentified "64-kDa" protein known to bind at this site. Addition of a phosphotyrosyl peptide comprising the region around Tyr-1009 stimulates SH-PTP2 activity 5-10-fold, whereas other phosphotyrosyl peptides from the platelet-derived growth factor receptor have no stimulatory effect. Our data suggest that binding of SH-PTP2 to the activated receptor in vivo should result in stimulation of SH-PTP2 activity.