SHP-1 is a cytoplasmic SH2 domain containing protein-tyrosine phosphatase (PTP) involved in the negative regulation of multiple signaling pathways in hematopoietic, nervous, and epithelial cells. The thyroid TRK-T3 oncogene consists of the NTRK1 tyrosine kinase domain fused in-frame with sequences of the TFG (TRK-fused gene), encoding a protein of unknown function. TFG contains a coiled-coil domain responsible for TRK-T3 oligomerization. In addition, recent analysis of the sequences outside of the coiled-coil domain suggested possible interactions with other proteins. Based on the presence of a putative SHP-1 SH2-binding site within the TFG sequences, we have investigated the role of the SHP-1 phosphatase in TRK-T3 oncoprotein signaling. In this study we show that SHP-1 interacts with and down-regulates TRK-T3. We provide evidence that SHP-1 SH2 and catalytic domains, respectively, associate with the TFG- and NTRK1-derived portions of TRK-T3. Our data contribute to the definition of cellular mechanisms involved in thyroid tumorigenesis. Moreover, it reveals TFG as a novel protein able to modulate SHP-1 activity.