To investigate the role of the src homology 2 (SH2)-containing inositol 5' phosphatase (SHIP) in growth factor-mediated signalling, we compared Steel factor (SF)-induced events in bone marrow-derived mast cells (BMMCs) from SHIP-/- and SHIP+/+ littermates. We found SF alone stimulated massive degranulation from SHIP-/- but none from SHIP+/+ BMMCs. This SF-induced degranulation, which was not due to higher c-kit levels in SHIP-/- cells, correlated with higher intracellular calcium than that in SHIP+/+ cells and was dependent on the influx of extracellular calcium. Both this influx and subsequent degranulation were completely inhibited by PI-3-kinase inhibitors, indicating that SF-induced activation of PI-3-kinase was upstream of extracellular calcium entry. A comparison of phosphatidylinositol-3,4,5-trisphosphate (PIP3) levels following SF stimulation of SHIP+/+ and SHIP-/- BMMCs suggested that SHIP restricted this entry by hydrolyzing PIP3. Although PI-3-kinase inhibitors blocked the release of intracellular calcium, implicating PIP3, and PLCgamma-2 was slightly more tyrosine phosphorylated in SHIP-/- cells, the increase in inositol-1,4,5-trisphosphate (IP3) and intracellular calcium levels were identical in SHIP-/- and SHIP+/+ BMMCs. These results suggest that SHIP prevents SF from triggering degranulation of normal BMMCs, and does so by hydrolyzing PIP3, which in turn limits extracellular calcium entry at a step after the release of intracellular calcium.