Phosphotyrosine phosphatases are critical negative or positive regulators in the intracellular signalling pathways that result in growth-factor-specific cell responses such as mitosis, differentiation, migration, survival, transformation or death. The SH2-domain-containing phosphotyrosine phosphatase SHP-2 is a positive signal transducer for several receptor tyrosine kinases (RTKs) and cytokine receptors. To investigate its mechanism of action we purified a tyrosine-phosphorylated glycoprotein which in different cell types associates tightly with SHP-2 and appears to serve as its substrate. Peptide sequencing in conjunction with complementary DNA cloning revealed a new gene family of at least fifteen members designated signal-regulatory proteins (SIRPs). They consist of two subtypes distinguished by the presence or absence of a cytoplasmic SHP-2-binding domain. The transmembrane polypeptide SIRP alpha1 is a substrate of activated RTKs and in its tyrosine-phosphorylated form binds SHP-2 through SH2 interactions and acts as its substrate. It also binds SHP-1 and Grb2 in vitro and has negative regulatory effects on cellular responses induced by growth factors, oncogenes or insulin. Our findings indicate that proteins belonging to the SIRP family generally regulate signals defining different physiological and pathological processes.