Shp-2, a widely expressed cytoplasmic tyrosine phosphatase with two SH2 domains, is believed to participate in signal relay downstream of growth factor receptors. We show here that this phosphatase also plays an important role in the control of cell spreading, migration, and cytoskeletal architecture. Fibroblast cells lacking a functional Shp-2 were impaired in their ability to spread and migrate on fibronectin compared with wild-type cells. Furthermore, Shp-2 mutant cells displayed an increased number of focal adhesions and condensed F-actin aggregation at the cell periphery, properties reminiscent of focal adhesion kinase (FAK)-deficient cells. This is consistent with our previous observations in vivo that mice homozygous for the Shp-2 mutation died at midgestation with similar phenotype to FAK and fibronectin-deficient embryos, having severe defects in mesodermal patterning, particularly the truncation of posterior structures. Biochemical analysis demonstrated that FAK dephosphorylation was significantly reduced in Shp-2 mutant cells in suspension. Furthermore, regulated association of Src SH2 domain with FAK and paxillin during cell attachment and detachment on fibronectin was disrupted in Shp-2 mutant cells. This report defines a unique role of the Shp-2 tyrosine phosphatase in cell motility, which might guide the design of a new strategy for pharmaceutical interference of tumor metastasis.