Both activating and inactivating mutations in protein tyrosine phosphatase Ptpn11 (encoding Shp2) are associated with tumorigenesis. However, the underlying mechanisms remain unclear. Here, we show that Shp2 plays an important role in mitosis, dysregulation of which results in chromosome instability and cancer predisposition. Depletion of Shp2 compromised the mitotic checkpoint. Shp2-depleted cells exhibited a delay in mitotic entry and an earlier mitotic exit. Moreover, Shp2 deficiency caused defective kinetochore-microtubule attachment, chromosome misalignment, chromosomal congression defects, lagging chromosomes, and chromosome missegregation. Reintroduction of wild-type Shp2, but not a catalytically deficient mutant, restored the checkpoint function and chromosome alignment at metaphase in Shp2-deficient cells, establishing a requirement for the catalytic activity of Shp2 during mitosis. Further analyses revealed that Shp2 was required for the optimal activation of the mitotic kinases PLK1 and Aurora B and thereby the proper kinetochore localization and phosphorylation of BubR1, a core mitotic checkpoint protein that is also critical for chromosome alignment. Together, our findings show a previously unrecognized role for Shp2 in the maintenance of chromosome stability and suggest a new mechanism by which dysregulation of Shp2 signaling contributes to malignancy development.