Activation of T cells induces rapid tyrosine phosphorylation on the T-cell receptor zeta chain and other substrates. These phosphorylations can be regulated by a number of protein-tyrosine kinases (ATP: protein-tyrosine O-phosphotransferase, EC 2.7.1.112) and protein-tyrosine-phosphatases (protein-tyrosine-phosphate phosphohydrolase, EC 3.1.3.48). In this study, we demonstrate that phenylarsine oxide can inhibit tyrosine phosphatases while leaving tyrosine kinase function intact. We use this reagent to investigate the effect of tyrosine phosphatase inhibition in a murine T-cell hybridoma. Increasing concentrations of phenylarsine oxide result in an increase in tyrosine phosphate on a number of intracellular substrates in unstimulated T cells, suggesting that a protein-tyrosine kinase is constitutively active in these cells. The effect of phenylarsine oxide on T cells stimulated with an anti-Thy 1 monoclonal antibody is more complex. At low concentrations of drug, there is a synergistic increase in the level of tyrosine phosphate on certain cellular substrates. At higher concentrations, anti-Thy 1-stimulated tyrosine phosphorylation is inhibited. These results indicate that tyrosine phosphorylation in T cells is tightly regulated by tyrosine phosphatases. Partial inhibition of these enzymes results in enhanced substrate phosphorylation. Inhibition of all stimulated tyrosine phosphorylation by high doses of phenylarsine oxide suggests that tyrosine kinase activity is regulated by tyrosine phosphatases.