The tyrosine phosphorylation of several proteins induced in neutrophils by soluble and particulate stimuli is thought to be crucial for initiating antimicrobial responses. Although activation of tyrosine kinases is thought to mediate this event, the role of tyrosine phosphatases in the initiation and modulation of neutrophil responses remains largely undefined. We investigated the role of Src homology 2-containing tyrosine phosphatase 1 (SHP-1; also known as protein tyrosine phosphatase 1C (PTP1C), hematopoetic cell phosphatase, PTP-N6, and SHPTP-1), a phosphatase expressed primarily in hemopoietic cells, in the activation of human neutrophils. SHP-1 mRNA and protein were detected in these cells, and the enzyme was found to be predominantly localized to the cytosol in unstimulated cells. Following stimulation with neutrophil agonists such as phorbol ester, chemotactic peptide, or opsonized zymosan, a fraction of the phosphatase redistributed to the cytoskeleton. Agonist treatment also induced significant decreases (30-60%) in SHP-1 activity, which correlated temporally with increases in the cellular phosphotyrosine content. Phosphorylation of SHP-1 on serine residues was associated with the inhibition of its enzymatic activity, suggesting a causal relationship. Accordingly, both the agonist-evoked phosphorylation of SHP-1 and the inhibition of its catalytic activity were blocked by treatment with bisindolylmaleimide I, a potent and specific inhibitor of protein kinase C (PKC) activity. Immunoprecipitated SHP-1 was found to be phosphorylated efficiently by purified PKC in vitro. Such phosphorylation also caused a decrease in the phosphatase activity of SHP-1. Together, these data suggest that inhibition of SHP-1 by PKC-mediated serine phosphorylation plays a role in facilitating the accumulation of tyrosine-phosphorylated proteins following neutrophil stimulation. These findings provide a new link between the PKC and tyrosine phosphorylation branches of the signaling cascade that triggers antimicrobial responses in human neutrophils.