Tyrosine phosphorylation and dephosphorylation are implicated in the regulation of cell growth and differentiation. A diverse identification of key regulatory proteins by their content of phosphotyrosine has been hampered by the very low level of tyrosine phosphorylation. This is presumably caused by the relative preponderance of phosphotyrosine phosphatase activity in many cells. We report that treatment of hematopoietic cells with phenylarsine oxide (PAO), a membrane-permeable phosphotyrosine phosphatase inhibitor, induced a dramatic accumulation of phosphotyrosine in a number of cellular proteins. No changes in serine or threonine phosphorylation were detected. The PAO-induced accumulation of phosphotyrosine occurred well before any signs of toxicity or irreversible damage to the cells were seen. Addition of dithiothreitol reversed the effect of PAO. Our data demonstrate that phosphotyrosine phosphatase activity has a major impact on the level of phosphotyrosine in cellular proteins, even in cells with high protein tyrosine kinase activity. Cells with constitutively elevated tyrosine kinase activity are easily detected following treatment with PAO and substrates with an otherwise too low phosphotyrosine content or too rapid phosphate turnover can be studied. This effect of PAO allows determinations of tyrosine phosphorylation-dependent complex formation between proteins.