We have identified a novel dual-specificity phosphatase (DSP), called LDP-2 (low-molecular-mass DSP-2), composed of 220 amino acid residues showing high sequence homology to VHR and LDP-1/TMDP, which belong to a family of DSPs with low molecular masses. The LDP-2 gene is ubiquitously expressed, and LDP-2 is localized in the cytoplasm. The main structural feature of LDP-2 is that the serine-156 residue located in the common active site sequence motif, HCXXGXXRS, for DSP is naturally substituted with an alanine residue. The recombinant LDP-2 protein showed extremely low phosphatase activity towards p-nitrophenyl phosphate (pNPP). Back-mutation of Ala-156 in LDP-2 to a serine (A156S mutation) conferred significant phosphatase activity towards pNPP. However, both LDP-2 and LDP-2 (A156S) exhibited substantial phosphatase activities towards both phospho-seryl/threonyl and -tyrosyl residues of myelin basic protein, with similar specific activities. Ala-156 of LDP-2 might be crucially involved in the recognition of a physiological substrate. We analyzed the effect of VHR and LDP-2 on mitogen-activated protein kinases (MAPKs) in vivo. We first found that VHR inhibits the activation of p38 as well as ERK and JNK, with similar efficiency. Under the conditions used, LDP-2 specifically suppressed JNK activation.