Tensin, an actin filament capping protein, and auxilin, a component of receptor-mediated endocytosis, are known to have 350 residue regions of significant sequence similarity near their N-termini (Schröder et al., 1995, Eur J Biochem 228:297-304). Here we demonstrate that these regions are homologous, not only to each other, but also to the catalytic domain of a putative protein tyrosine phosphatase (PTP) from Saccharomyces cerevisiae and to other PTPs. We propose that the PTP-like portion of the homology region of tensin and auxilin represents a distinct domain. A detailed sequence comparison indicates that the PTP-like domain in tensin is unlikely to exhibit phosphatase activity, whereas in auxilin it may possess a different phosphatase specificity from tyrosine phosphatases. It is probable that the PTP-like domains in tensin and auxilin mediate binding interactions with phosphorylated polypeptides; they may therefore represent members of a distinct class of phosphopeptide recognition domain.