SHPTP1 (PTP1C, HCP, SHP) is an SH2 domain-containing tyrosine phosphatase expressed predominantly in hematopoietic cells. A frameshift mutation in the SHPTP1 gene causes the motheaten (me/me) mouse. These mice are essentially SHPTP1 null and display multiple hematopoietic abnormalities, most prominently hyperproliferation and inappropriate activation of granulocytes and macrophages. The me/me phenotype suggests that SHPTP1 negatively regulates macrophage proliferative pathways. Using primary bone marrow-derived macrophages from me/me mice and normal littermates, we examined the role of SHPTP1 in regulating signaling by the major macrophage mitogen colony-stimulating factor 1 (CSF-1) (also known as macrophage colony-stimulating factor). Macrophages from me/me mice hyperproliferate in response to CSF-1. In the absence of SHPTP1, the CSF-1 receptor (CSF-1R) is hyperphosphorylated upon CSF-1 stimulation, suggesting that SHPTP1 dephosphorylates the CSF-1R. At least some CSF-1R-associated proteins also are hyperactivated. SHPTP1 is associated constitutively, via its SH2 domains, with an unidentified 130-kDa phosphotyrosyl protein (P130). P130 and SHPTP1 are further tyrosyl phosphorylated upon CSF-1 stimulation. Tyrosyl-phosphorylated SHPTP1 binds to Grb2 via the Grb2 SH2 domain. Moreover, in me/me macrophages, Grb2 is associated, via its SH3 domains, with several tyrosyl phosphoproteins. These proteins are hyperphosphorylated on tyrosyl residues in me/me macrophages, suggesting that Grb2 may recruit substrates for SHPTP1. Our results indicate that SHPTP1 is a critical negative regulator of CSF-1 signaling in vivo and suggest a potential new function for Grb2.