Tyrosine phosphorylation of cytoskeletal proteins plays an important role in the regulation of focal adhesions and stress fiber organization. In the present study we examined the role of tyrosine phosphatases in this process using p125FAK and paxillin as substrates. We show that tyrosine phosphatase activity in Swiss 3T3 cells was markedly increased when actin stress fibers were disassembled by cell detachment from the substratum, by serum starvation, or by cytochalasin D treatment. This activity was blocked by phenylarsine oxide, an inhibitor of a specific class of tyrosine phosphatases characterized by two vicinal thiol groups in the active site. Phenylarsine oxide treatment of serum-starved cells induced increased tyrosine phosphorylation of p125FAK and paxillin in a dose-dependent manner and induced assembly of focal adhesions and actin stress fibers, showing that inhibition of one or more phenylarsine oxide-sensitive tyrosine phosphatases is a sufficient stimulus for triggering focal adhesion and actin stress fiber formation in adherent cells.