Tumor necrosis factor-alpha (TNF-alpha) can modulate the signalling capacity of tyrosine kinase receptors; in particular, TNF-alpha has been shown to mediate the insulin resistance associated with animal models of obesity and noninsulin-dependent diabetes mellitus. In order to determine whether the effects of TNF-alpha might involve alterations in the expression of specific protein-tyrosine phosphatases (PTPases) that have been implicated in the regulation of growth factor receptor signalling, KRC-7 rat hepatoma cells were treated with TNF-alpha, and changes in overall tissue PTPase activity and the abundance of three major hepatic PTPases (LAR, PTP1B, and SH-PTP2) were measured in addition to effects of TNF-alpha on ligand-stimulated autophosphorylation of insulin and epidermal growth factor (EGF) receptors and insulin-stimulated insulin receptor substrate-1 (IRS-1) phosphorylation. TNF-alpha caused a dose-dependent decrease in insulin-stimulated IRS-1 phosphorylation and EGF-stimulated receptor autophosphorylation to 47-50% of control. Overall PTPase activity in the cytosol fraction did not change with TNF-alpha treatment, and PTPase activity in the particulate fraction was decreased by 55-66%, demonstrating that increases in total cellular PTPase activity did not account for the observed alterations in receptor signalling. However, immunoblot analysis showed that TNF-alpha treatment resulted in a 2.5-fold increase in the abundance of SH-PTP2, a 49% decrease in the transmembrane PTPase LAR, and no evident change in the expression of PTP1B. These data suggest that at least part of the TNF-alpha effect on pathways of reversible tyrosine phosphorylation may be exerted through the dynamic modulation of the expression of specific PTPases. Since SH-PTP2 has been shown to interact directly with both the EGF receptor and IRS-1, increased abundance of this PTPase, may mediate the TNF-alpha effect to inhibit signalling through these proteins. Furthermore, decreased abundance of the LAR PTPase, which has been implicated in the regulation of insulin receptor phosphorylation, may account for the less marked effect of TNF-alpha on the autophosphorylation state of the insulin receptor while postreceptor actions of insulin are inhibited.