CD22 is a B cell membrane glycoprotein that, upon Ag receptor engagement, becomes rapidly tyrosyl phosphorylated and associates with several signaling molecules including Lyn, Syk, PLCgamma1, and the protein-tyrosine phosphatase, SHP-1. Two allelic forms of murine CD22 exist: CD22.1 is expressed in strains such as NZB and DBA/2, whereas CD22.2 is expressed in BALB/c and most other strains. WEHI-231 cells, which derive from a (BALB/c x NZB)F1 mouse, express one copy of each allele. Previous studies have proposed both positive and negative functions for CD22. We explored the role of CD22 in surface IgM Ag receptor signal transduction by examining signaling in three clonally independent WEHI-231 variants that have lost expression of the CD22.2 allele. This experimental design allowed us to assess the signaling functions of CD22 independent of its developmental role. These variants, which exhibit a 50% reduction of total surface CD22, are hyper-responsive to Ag receptor stimulation: several cellular proteins are hyperphosphorylated on tyrosyl residues and surface IgM-mediated calcium flux is markedly increased. Interestingly, the increased calcium response observed in CD22-deficient cells is due largely to enhanced calcium influx. Reconstitution of CD22 expression reduces these changes. The SHP-1/CD22 association is reduced in CD22-deficient cell lines and is restored by re-expression of CD22. Our results demonstrate that CD22 is a cell autonomous negative regulator of B cell Ag receptor signaling, and suggest that it regulates calcium entry via a mechanism downstream from or independent of calcium release from intracellular stores.