A non-transmembrane protein-tyrosine phosphatase, PTP-S, has been shown to bind to DNA in vitro through its C-terminal noncatalytic domain. The cellular PTP-S gene product was identified as 42-44 kDa polypeptides in the rat fibroblast cell lines Rat2 and F111, by immunoblotting using polyclonal and monoclonal antibodies. Indirect immunofluorescence-staining experiments showed that PTP-S was predominantly associated with the nuclear compartment in interphase cells, although some fluorescence was present in cytoplasm. This protein appeared to be uniformly distributed throughout the cell during mitosis. Subcellular fractionation followed by immunoblotting supports the immunofluorescence data showing that PTP-S was present in the nucleus as well as cytoplasm. PTP-S could be released from the isolated nuclei by moderate salt concentration (400 mM NaCl) or mild treatment with DNAase I, suggesting that at least part of this protein present in the nucleus was associated with chromatin. PTP-S extracted from nuclei of Rat2 cells binds to DNA, as determined by DNA affinity chromatography. The nuclear location of this phosphatase, and its association with chromatin, provide support to our previous suggestion that the DNA-binding property of this phosphatase may be physiologically relevant.