Tyrosine phosphorylation of the cell cycle regulator p27(Kip1) plays a crucial role in its binding to cyclin dependent kinases and its subcellular localization. While Src and Bcr-Abl were shown to be responsible for tyrosine phosphorylation, no data are available on the dephosphorylation of p27(Kip1) and the phosphatase involved. Considering the associated dephosphorylation as a pivotal event in the regulation of cell cycle proteins, we focused on the tyrosine phosphatase SHP-2, which is regulated in promyelocytic leukemia cells on G-CSF stimulation. SHP-2 was thus found in association with p27(Kip1) and the G-CSF receptor, and we observed a nuclear translocation of SHP-2 on G-CSF stimulation. Using a catalytically inactive form of SHP-2 and siRNA directed against SHP-2, we could demonstrate the involvement of SHP-2 in tyrosine dephosphorylation of p27(Kip1). Moreover, SHP-2 was strongly activated on G-CSF stimulation and specifically dephosphorylated p27(Kip1) in vitro. Most importantly, we could illustrate that SHP-2 modulates p27(Kip1) stability and contributes to p27(Kip1)-mediated cell cycle progression. Taken together, our results demonstrate that SHP-2 is a key regulator of p27(Kip1) tyrosine phosphorylation.