The protein tyrosine phosphatase, SHP2, is widely expressed; however, previous studies demonstrated that hematopoietic cell development more stringently requires Shp2 expression compared to other tissues. Furthermore, somatic gain-of-function SHP2 mutants are commonly found in human myeloid leukemias. Given that pharmacologic inhibitors to SHP2 phosphatase activity are currently in development as putative antileukemic agents, we conducted a series of experiments examining the necessity of SHP2 phosphatase activity for human hematopoiesis. Anti-sense oligonucleotides to human SHP2 coding sequences reduced human cord blood- and human cell line, TF1-derived colony formation. Expression of truncated SHP2 bearing its Src homology 2 (SH2) domains, but lacking the phosphatase domain similarly reduced human cord blood- and TF1-derived colony formation. Mechanistically, expression of truncated SHP2 reduced the interaction between endogenous, full-length SHP2 with the adapter protein, Grb2. To verify the role of SHP2 phosphatase function in human hematopoietic cell development, human cord blood CD34+ cells were transduced with a leukemia-associated phosphatase gain-of-function SHP2 mutant or with a phosphatase dead SHP2 mutant, which indicated that increased phosphatase function enhanced, while decreased SHP2 phosphatase function reduced, human cord blood-derived colonies. Collectively, these findings indicate that SHP2 phosphatase function regulates human hematopoietic cell development and imply that the phosphatase component of SHP2 may serve as a pharmacologic target in human leukemias bearing increased SHP2 phosphatase activity.