The cytosolic SHP-2 (Src homology protein tyrosine phosphatase 2) has previously been implicated in IL-3 (interleukin-3) signalling [Bone, Dechert, Jirik, Schrader and Welham (1997) J. Biol. Chem. 272, 14470 -14476; Craddock and Welham (1997) J. Biol. Chem. 272, 29281-29289; Welham, Dechert, Leslie, Jirik and Schrader (1994) J. Biol. Chem. 269, 23764-23768; Qu, Nguyen, Chen and Feng (2001) Blood 97, 911-914]. To investigate the role of SHP-2 in IL-3 signalling in greater detail, we have inducibly expressed WT (wild-type) or two potentially substrate-trapping mutant forms of SHP-2, generated by mutation of Asp-425 to Ala (D425A) or Cyst-459 to Ser (C459S), in IL-3-dependent BaF/3 cells. Effects on IL-3-induced tyrosine phosphorylation, signal transduction and functional responses were examined. Expression of C459S SHP-2 protected the beta-chain of the murine IL-3R (IL-3 receptor), the adaptor protein Gab2 (Grb2-associated binder 2), and a cytosolic protein of 48 kDa from tyrosine dephosphorylation, consistent with them being bona fide substrates of SHP-2 in IL-3 signalling. The tyrosine phosphorylation of a 135 kDa transmembrane protein was also protected upon expression of C459S SHP-2. We have identified the inhibitory immunoreceptor PECAM-1 (platelet endothelial cell adhesion molecule-1)/CD31 (cluster determinant 31) as a component of this 135 kDa substrate and also show that IL-3 can induce tyrosine phosphorylation of PECAM-1. Expression of WT, C459S and D425A forms of SHP-2 had little effect on IL-3-driven proliferation or STAT5 (signal transduction and activators of transcription) phosphorylation or activation of protein kinase B. However, expression of WT SHP-2 increased ERK (extracellular-signal-regulated kinase) activation. Interestingly, expression of C459S SHP-2 decreased ERK activation at later times after IL-3 stimulation, but potentiated IL-3-induced activation of Jun N-terminal kinases. In addition, expression of C459S SHP-2 decreased cell survival in suboptimal IL-3 and upon IL-3 withdrawal. These findings indicate that SHP-2 plays an important role in mediating the anti-apoptotic effect of IL-3 and raises the possibility that PECAM-1 participates in the modulation of cytokine-induced signals.