Helicobacter pylori (H. pylori) is estimated to infect about half of the world population. It causes gastric diseases ranging from gastritis to cancer and has been classified as a class I carcinogen by WHO. However, little is known about the molecular mechanisms by which H. pylori induces pathogenesis. CagA is the product of the cagA gene carried among virulent H. pylori strains and is associated with severe clinical outcomes, most notably gastric carcinoma. CagA is injected from the attached H. pylori into gastric epithelial cells and undergoes tyrosine phosphorylation. We found that wild-type, but not phosphorylation-resistant CagA, is capable of inducing a growth factor-like morphological change, termed the hummingbird phenotype, in cells. Furthermore, CagA specifically binds the SH2-containing protein tyrosine phosphatase SHP-2 in a tyrosine phosphorylation-dependent manner and stimulates phosphatase activity. Disruption of the CagA-SHP-2 complex abolishes the CagA-dependent morphological change. Conversely, constitutively active SHP-2 is capable of inducing a CagA-like morphological change when it is plasma membrane-targeted. Our results show that CagA perturbs cellular functions by deregulating SHP-2 phosphatase after translocation from H. pylori into gastric epithelial cells. Given the positive regulatory roles of SHP-2 in both cell proliferation and cell movement, the CagA-SHP-2 interaction may play an important role in the oncogenic transformation that is a hallmark of cagA+ H. pylori infection.