The domain organization of many signalling proteins facilitates a segregation of binding, catalytic and regulatory functions. The mammalian SH2 domain protein tyrosine phosphatases (PTPs) contain tandem SH2 domains and a single carboxy-terminal catalytic domain. SH-PTP1 (PTP1C, HCP) and SH-PTP2 (Syp, PTP2C, PTP1D) function downstream from tyrosine kinase-linked insulin, growth factor, cytokine and antigen receptors. As well as directing subcellular localization by binding to receptors and their substrates, the two SH2 domains of these PTPs function together to regulate catalysis. Here we report the structure of the tandem SH2 domains of SH-PTP2 in complex with monophosphopeptides. A fixed relative orientation of the two domains, stabilized by a disulphide bond and a small hydrophobic patch within the interface, separates the peptide binding sites by approximately 40 A. The defined orientation of the SH2 domains in the structure, and data showing that peptide orientation and spacing between binding sites is critical for enzymatic activation, suggest that spatial constraints are important in this multidomain protein-protein interaction.