Src homology region 2-domain-containing phosphatase-1 (SHP-1) plays an important role in the regulation of signaling from various receptors in hematopoietic cells. In mast cells, SHP-1 has been shown to negatively regulate the initial signaling triggered by high-affinity receptor for IgE (FcepsilonRI) and positively regulate downstream outputs. To clarify the molecular mechanisms of SHP-1 in mast cells, we determined substrates for SHP-1 by using the substrate-trapping approach. When phosphatase-inactive SHP-1 was over-expressed in rat basophilic leukemia (RBL)-2H3 cells, tyrosine phosphorylation of a 68-kDa protein was enhanced before and after FcepsilonRI aggregation. Immunoprecipitation and western blot analyses revealed that this protein is SHP-1, either endogenous or ectopically expressed. FcepsilonRI-induced activation of Lyn and Syk was comparable between cells expressing wild-type (wt) and phosphatase-inactive SHP-1. In vitro phosphatase assay and combined transfection, immunoprecipitation and immunoblot analyses showed that tyrosine 536 of SHP-1 was potent phosphorylation site and that SHP-1 could dephosphorylate this site that had been phosphorylated by Lyn. Furthermore, the phosphatase activity of SHP-1 immunoprecipitated from cells expressing a phosphatase-inactive SHP-1 was increased compared with that from vector-transfected or wt SHP-1-expressing cells. Finally, expression of phosphatase-inactive SHP-1 resulted in decreased activation of mitogen-activated protein kinases and suppressed transcription of cytokine genes, whereas wt SHP-1 enhanced these processes. Taken collectively, these results suggest that SHP-1 may be a physiological substrate of SHP-1 in RBL-2H3 cells and that dephosphorylation of SHP-1 leads to a decrease in its catalytic activity and an enhancement of downstream signaling. A negative autoregulatory circuit of SHP-1 may contribute to mast cell regulation.