Mutations in the FLT3 gene are the most common genetic alteration found in AML patients. FLT3 internal tandem duplication (ITD) mutations result in constitutive activation of FLT3 tyrosine kinase activity. The consequences of this activation are an increase in total phosphotyrosine content, persistent downstream signaling, and ultimately transformation of hematopoietic cells to factor-independent growth. The Src homology (SH)2 domain-containing protein-tyrosine phosphatase (SHP)-1 is involved in the down-regulation of a broad range of growth factor and cytokine-driven signaling cascades. Loss-of-function or deficiency of SHP-1 activity results in a hyperproliferative response of myelomonocytic cell populations to growth factor stimulation. In this study, we examined the possible role of SHP-1 in regulating FLT3 signaling. We found that transformation of TF-1 cells with FLT3/ITD mutations suppressed the activity of SHP-1 by approximately 3-fold. Suppression was caused by decreased SHP-1 protein expression, as analyzed at both the protein and RNA levels. In contrast, protein levels of SHP-2, a phosphatase that plays a stimulatory role in signaling through a variety of receptors, did not change significantly in FLT3 mutant cells. Suppressed SHP-1 protein levels in TF-1/ITD cells were partially overcome after cells were exposed to CEP-701, a selective FLT3 inhibitor. SHP-1 protein levels also increased in naturally occurring FLT3/ITD expressing AML cell lines and in primary FLT3/ITD AML samples after CEP-701 treatment. Furthermore, a small but reproducible growth/survival advantage was observed in both TF-1 and TF-1/ITD cells when SHP-1 expression was knocked down by RNAi. Taken together, these data provide the first evidence that suppression of SHP-1 by FLT3/ITD signaling may be another mechanism contributing to the transformation by FLT3/ITD mutations.