Recently, there have been several reports describing the cloning and characterization of the novel family of protein tyrosine phosphatase-like receptor molecules (known as IA-2 and PTP-NP/PTP-IAR/IA-2beta/phogrin), which may act as autoantigens in diabetes. Here, we report the molecular characterization and chromosomal localization of a new isoform of this family in brain termed PTP-NP-2 (for PTP-NP tyrosine phosphatase isoform), and its function in rat primary hippocampal neurons. PTP-NP-2 has 48% identity to IA-2. The principal difference between PTP-NP-2 and PTP-NP is a 17-amino-acid insert near the N-terminus of PTP-NP that is absent in PTP-NP-2. Genomic DNA analysis indicates that the 17-amino-acid insert is coded by a separate exon, suggesting that both IA-2beta and PTP-NP-2 are isoforms arising by alternate splicing of the same gene. Reverse transcriptase-PCR revealed that both isoforms are present in human SH-SY5Y neuroblastoma cells. PTP-NP-2 mRNA expression is highly restricted, with a 5.5-kb specific transcript in human fetal and adult brain and 5.5 and 3. 8 kb in human adult pancreas. SH-SY5Y neuroblastoma and U87-MG glioblastoma cells showed specific transcripts of 5.5 and 3.8<HSP SP = "0.25">kb, respectively, indicating the existence of several isoforms of this molecule in the nervous system. The human gene encoding PTP-NP-2 was assigned to human chromosome 7q22-qter using Southern blot analysis of genomic DNAs from rodent/human somatic hybrid cell lines. Confocal microscopy analyses of rat primary hippocampal neurons revealed that PTP-NP-2 is abundantly expressed on synaptic boutons in primary neurons. Wild-type PTP-NP-2 showed no measurable tyrosine phosphatase activity using an in-vitro pNPP assay. Examination of the PTP-NP-2 catalytic consensus sequence revealed that this sequence differed from the typical tyrosine phosphatase-domain consensus sequence by an alanine to aspartate change (amino acid 930). Mutation of aspartate 930 to alanine produced a catalytically active enzyme, suggesting that native PTP-NP and its isoform PTP-NP-2 are catalytically inactive receptor protein tyrosine phosphatase homologues. Taken together, these results indicate that the tyrosine phosphatase PTP-NP-2 is a new isoform of PTP-NP tyrosine phosphatase, is expressed on synaptic boutons and may participate in the regulation of synaptic bouton endocytosis.