The D-3 phosphoinositide lipids phosphatidylinositol 3,4, 5-trisphophate [PtdIns(3,4,5)P(3)] and phosphatidylinositol 3, 4-bisphosphate [PtdIns(3,4)P(2)] represent upstream components of a major signaling pathway that is strongly activated by the T cell costimulatory molecule CD28. A major route for degradation of PtdIns(3,4,5)P(3) (and hence, regulation of PtdIns(3,4,5)P(3)-driven effector pathways), involves its conversion to PtdIns(3,4)P(2) by the 145-kDa SH2-containing inositol (poly)phosphate 5-phosphatase (SHIP). In this study, we demonstrate using the murine T cell hybridoma DC27.1, that SHIP is strongly tyrosine phosphorylated after ligation of CD28 by either mAb or the natural ligand B7.1. Ligation of CD3 also stimulates SHIP tyrosine phosphorylation and an additive effect on tyrosine phosphorylation of SHIP is observed when both CD3 and CD28 are ligated. The tyrosine phosphorylation of SHIP in response to CD28 ligation correlates with a marked redistribution of SHIP from the cytosol to the plasma membrane, as well as an increase in the in vitro 5-phosphatase activity associated with SHIP immunoprecipitates derived from CD28-stimulated cells. However, we have been unable to detect a direct association between CD28 and SHIP, so the mechanisms by which CD28 exerts the observed effects on SHIP remain unclear. This is the first demonstration that SHIP is a biochemical target for CD28 and suggests that SHIP may be involved in the regulation of T cell activation.