Src homology 2 (SH2) domains are phosphotyrosine- (pY-) binding modules found in a variety of signal-transducing proteins and constitute an important class of drug targets for the treatment of signaling related diseases/conditions. To date, a large number of peptidic as well as nonpeptidic SH2 domain inhibitors have been reported. However, all of these inhibitors contain a negatively charged pY mimetic as the core structure and generally have poor membrane permeability. We report here that peptidyl cinnamaldehydes function as reversible, slow-binding inhibitors toward the SH2 domains of protein tyrosine phosphatase SHP-1. Specific interactions between the SH2 domains and the aldehydes were assessed by their ability to relieve the autoinhibitory effect of the N-terminal SH2 domain on SHP-1 catalytic activity and the surface plasmon resonance technique. The most potent inhibitor (Cinn-GEE) displayed a K(D) value of 1.3 microM against the N-terminal SH2 domain of SHP-1. The mechanism of inhibition was investigated by site-directed mutagenesis and by using Cinn-GEE specifically labeled with (13)C at the aldehyde carbon and (1)H-(13)C heteronuclear single-quantum coherence spectroscopy. The proposed mechanism involves the formation of an initial noncovalent E.I complex, which is slowly converted into a covalent imine/enamine adduct (E.I) between the aldehyde group of the inhibitor and the guanidine group of Arg betaB5 in the pY-binding pocket of the SH2 domains. These aldehydes should provide a general, neutral pharmacophore for the further development of potent, specific, and membrane-permeable SH2 domain inhibitors.