Sequence specificity of SHP-1 and SHP-2 Src homology 2 domains. Critical roles of residues beyond the pY+3 position

A combinatorial phosphotyrosyl (pY) peptide library was screened to determine the amino acid preferences at the pY+4 to pY+6 positions for the four SH2 domains of protein-tyrosine phosphatases SHP-1 and SHP-2. Individual binding sequences selected from the library were resynthesized and their binding affinities and specificities to various SH2 domains were further evaluated by SPR studies, stimulation of SHP-1 and SHP-2 phosphatase activity, and in vitro pulldown assays. These studies reveal that binding of a pY peptide to the N-SH2 domain of SHP-2 is greatly enhanced by a large hydrophobic residue (Trp, Tyr, Met, or Phe) at the pY+4 and/or pY+5 positions, whereas binding to SHP-1 N-SH2 domain is enhanced by either hydrophobic or positively charged residues (Arg, Lys, or His) at these positions. Similar residues at the pY+4 to pY+6 positions are also preferred by SHP-1 and SHP-2 C-SH2 domains, although their influence on the overall binding affinities is much smaller compared with the N-SH2 domains. A structural model was generated to qualitatively interpret the contribution of the pY+4 and pY+5 residues to the overall binding affinity. Examination of pY motifs from known SHP-1 and SHP-2-binding proteins shows that many of the pY motifs contain a hydrophobic or positively charged residue(s) at the pY+4 and pY+5 positions.     

Janus kinase 2 is associated with a box 1-like motif and phosphorylates a critical tyrosine residue in the cytoplasmic region of cytotoxic T lymphocyte associated molecule-4

It is a consensus that a cytotoxic T lymphocyte associated molecule-4 (CTLA-4) transduces inhibitory signal for T cell activation under physiological condition, indicating that this molecule is an important regulator of T cell homeostasis in vivo. It has been reported that phosphorylation and dephosphorylation of tyrosine residue Y-165 in the cytoplasmic region of CTLA-4 play an important role in its negative signaling and cell surface expression. Some signaling molecules such as Src homology 2 protein tyrosine phosphatase 2 (SHP-2) and the p85 subunit of phosphatidylinositol 3 kinase (PI3 kinase) associate with phosphorylated tyrosine residue Y-165, through Src homology 2 (SH2) domains. On the other hand, the adapter complex proteins, AP-2 and AP-50 interact with the same tyrosine residue when unphosphorylated, resulting in clathrin-mediated endocytosis of CTLA-4 molecules. The objective of this study is to identify a tyrosine kinase that can directly bind and phosphorylate the critical tyrosine residue, Y-165 in the cytoplasmic domain of CTLA-4. Here, we demonstrated that 1) Janus Kinase 2 (Jak2) was directly associated with a box 1-like motif in the cytoplasmic tail of CTLA-4 molecule, 2) Jak2 phosphorylated Y-165 residue in the cytoplasmic region of CTLA-4 molecule, and 3) Jak2 was associated with CTLA-4 in HUT 78 T cell lines.     

A yeast two-hybrid study of human p97/Gab2 interactions with its SH2 domain-containing binding partners

p97/Gab2 is a recently characterized member of a large family of scaffold proteins that play essential roles in signal transduction. Gab2 becomes tyrosine-phosphorylated in response to a variety of growth factors and forms multimolecular complexes with SH2 domain-containing signaling molecules such as the p85-regulatory subunit of the phosphoinositide-3-kinase (p85-PI3K), the tyrosine phosphatase SHP-2 and the adapter protein CrkL. To characterize the interactions between Gab2 and its SH2-containing binding partners, we designed a modified yeast two-hybrid system in which the Lyn tyrosine kinase is expressed in a regulated manner in yeast. Using this assay, we demonstrated that p97/Gab2 specifically interacts with the SH2 domains of PI3K, SHP-2 and CrkL. Interaction with p85-PI3K is mediated by tyrosine residues Y452, Y476 and Y584 of Gab2, while interaction with SHP-2 depends exclusively on tyrosine Y614. CrkL interaction is mediated by its SH2 domain recognizing Y266 and Y293, despite the latter being in a non-consensus (YTFK) environment.     

Blocking the function of tyrosine phosphatase SHP-2 by targeting its Src homology 2 domains

SHP-2 is an Src homology 2 (SH2) domain-containing tyrosine phosphatase with crucial functions in cell signaling and major pathological implications. It stays inactive in the cytosol and is activated by binding through its SH2 domains to tyrosine-phosphorylated receptors on the cell surface. One such cell surface protein is PZR, which contains two tyrosine-based inhibition motifs responsible for binding of SHP-2. We have generated a glutathione S-transferase fusion protein carrying the tandem tyrosine-based inhibition motifs of PZR, and the protein was tyrosine-phosphorylated by co-expressing c-Src in Escherichia coli cells. The purified phosphoprotein displays a strong binding to SHP-2 and causes its activation in vitro. However, when introduced into NIH 3T3 cells by using a protein delivery reagent, it effectively inhibited the activation of ERK1/2 induced by growth factors and serum but not by phorbol ester, in reminiscence of the effects caused by expression of dominant negative SHP-2 mutants and deletion of functional SHP-2. The data suggest that the exogenously introduced PZR protein specifically binds SHP-2, blocks its translocation, and renders it functionally incompetent. This is further supported by the fact that the phosphorylated PZR protein had no inhibitory effects on fibroblasts derived from mice expressing only a mutant SHP-2 protein lacking most of the N-terminal SH2 domain. This study thus provides a novel and highly specific method to interrupt the function of SHP-2 in cells.     

The novel role of the C-terminal region of SHP-2. Involvement of Gab1 and SHP-2 phosphatase activity in Elk-1 activation

SHP-2, a nontransmembrane-type protein-tyrosine phosphatase that contains two Src homology 2 (SH2) domains, is thought to participate in growth factor signal transduction pathways via SH2 domain interactions. To determine the role of each region of SHP-2 in platelet-derived growth factor signaling assayed by Elk-1 activation, we generated six deletion mutants of SHP-2. The large SH2 domain deletion SHP-2 mutant composed of amino acids 198-593 (SHP-2-(198-593)), but not the smaller SHP-2-(399-593), showed significantly higher SHP-2 phosphatase activity in vitro. In contrast, SHP-2-(198-593) mutant inhibited wild type SHP-2 phosphatase activity, whereas SHP-2-(399-593) mutant increased activity. To understand these functional changes, we focused on the docking protein Gab1 that assembles signaling complexes. Pull-down experiments with Gab1 suggested that the C-terminal region of SHP-2 as well as the SH2 domains (N-terminal region) associated with Gab1, but the SHP-2-(198-593) mutant did not associate with Gab1. SHP-2-(1-202) or SHP-2-(198-593) inhibited platelet-derived growth factorinduced Elk-1 activation, but SHP-2-(399-593) increased Elk-1 activation. Co-expression of SHP-2-(1-202) with SHP-2-(399-593) inhibited SHP-2-(399-593)/Gab1 interaction, and the SHP-2-(399-593) mutant induced SHP-2 phosphatase and Elk-1 activation, supporting the autoinhibitory effect of SH2 domains on the C-terminal region of SHP-2. These data suggest that both SHP-2/Gab1 interaction in the C-terminal region of SHP-2 and increased SHP-2 phosphatase activity are important for Elk-1 activation. Furthermore, we identified a novel sequence for SHP-2/Gab1 interactions in the C-terminal region of SHP-2.     

An Investigation of Hierachical Protein Recruitment to the Inhibitory Platelet Receptor,G6B-b

Platelet activation is regulated by both positive and negative signals. G6B-b is an inhibitory platelet receptor with an immunoreceptor tyrosine-based inhibitory motif (ITIM) and an immunoreceptor tyrosine-based switch motif (ITSM). The molecular basis of inhibition by G6B-b is currently unknown but thought to involve the SH2 domain-containing tyrosine phosphatase SHP-1. Here we show that G6B-b also associates with SHP-2, as well as SHP-1, in human platelets. Using a number of biochemical approaches, we found these interactions to be direct and that the tandem SH2 domains of SHP-2 demonstrated a binding affinity for G6B-b 100-fold higher than that of SHP-1. It was also observed that while SHP-1 has an absolute requirement for phosphorylation at both motifs to bind, SHP-2 can associate with G6B-b when only one motif is phosphorylated, with the N-terminal SH2 domain and the ITIM being most important for the interaction. A number of other previously unreported SH2 domain-containing proteins, including Syk and PLCγ2, also demonstrated specificity for G6B-b phosphomotifs and may serve to explain the observation that G6B-b remains inhibitory in the absence of both SHP-1 and SHP-2. In addition, the presence of dual phosphorylated G6B-b in washed human platelets can reduce the EC₅₀ for both CRP and collagen.     

Kinetic comparison of the catalytic domains of SHP-1 and SHP-2

The phosphatase activity of SH2-containing protein tyrosine phosphatase (SHP) is inhibited by its SH2 domains and C-terminal tail. In order to determine the inhibitory effects of the SH2 domains and C-terminal tail, we have expressed and purified the catalytic domains of SHP-1 and SHP-2, and the SH2 domain truncated SHP-1 and SHP-2. We have then measured their kinetic parameters using p-nitrophenyl phosphate (p-NPP) and phosphotyrosine (pY) as substrates under the same experimental conditions. The results indicate that the pH-dependent profiles of SHP-1 and SHP-2 are mainly determined by their catalytic domains. Both enzymes have maximum activity at pH 5.0. In addition, the phosphatase activity of different forms of SHP-1 and SHP-2 decreases as the salt concentration increases. Without SH2 domains, both SHP-1 and SHP-2 are no longer inhibited by their C-terminal tails. However, the C-terminal tail of SHP-1 can further prevent the salt inhibition of the phosphatase activity. Under the same experimental conditions, the catalytic domain of SHP-1 is two times more active than the catalytic domain of SHP-2.     

Decoding protein-protein interactions through combinatorial chemistry: sequence specificity of SHP-1, SHP-2, and SHIP SH2 domains

A general, combinatorial library method for the rapid identification of high-affinity peptide ligands of protein modular domains is reported. The validity of this method has been demonstrated by determining the sequence specificity of four Src homology 2 (SH2) domains derived from protein tyrosine phosphatase SHP-1 and SHP-2 and inositol phosphatase SHIP. A phosphotyrosyl (pY) peptide library was screened against the SH2 domains, and the beads that carry high-affinity ligands of the SH2 domains were identified and peptides were sequenced by partial Edman degradation and mass spectrometry. The results reveal that the N-terminal SH2 domain of SHP-2 is capable of recognizing four different classes of pY peptides. Binding competition studies suggest that the four classes of pY peptides all bind to the same site on the SH2 domain surface. The C-terminal SH2 domains of SHP-1 and SHP-2 and the SHIP SH2 domain each bind to pY peptides of a single consensus sequence. Database searches using the consensus sequences identified most of the known as well as many potential interacting proteins of SHP-1 and/or SHP-2. Several proteins are found to bind to the SH2 domains of SHP-1 and SHP-2 through a new, nonclassical ITIM motif, (V/I/L)XpY(M/L/F)XP, which corresponds to the class IV peptides selected from the pY library. The combinatorial library method should be generally applicable to other protein domains.     

Molecular dynamics simulations on the free and complexed N-terminal SH2 domain of SHP-2

Signal transduction events are often mediated by small protein domains such as SH2 (Src homology 2) domains that recognize phosphotyrosines (pY) and flanking sequences. In case of the SHP-2 receptor tyrosine phosphatase an N-terminal SH2 domain binds and inactivates the phosphatase (PTP) domain. The pY-peptide-binding site on the N-terminal SH2 domain does not overlap with the PTP binding region. Nevertheless, pY-peptide binding causes domain dissociation and phosphatase activation. Comparative multi-nanosecond molecular dynamics simulations on the N-SH2 domain in ligand-bound and free states have been performed to study the allosteric mechanism that leads to domain dissociation upon pY-peptide binding. Significant ligand-dependent differences in the conformational flexibility of regions that are involved in SH2-PTP domain association have been observed. The results support a mechanism of signal transduction where SH2-peptide binding modulates the domain flexibility and reduces its capacity to fit into the entrance of the PTP catalytic domain of SHP-2.     

Co-clustering of Fcgamma and B cell receptors induces dephosphorylation of the Grb2-associated binder 1 docking protein.

The immunoreceptor tyrosine-based inhibitory motif (ITIM) of human type IIb Fcgamma receptor (FcgammaRIIb) is phosphorylated on its tyrosine upon co-clustering with the B cell receptor (BCR). The phosphorylated ITIM (p-ITIM) binds to the SH2 domains of polyphosphoinositol 5-phosphatase (SHIP) and the tyrosine phosphatase, SHP-2. We investigated the involvement of the molecular complex composed of the phosphorylated SHIP and FcgammaRIIb in the activation of SHP-2. As a model compound, we synthesized a bisphosphopeptide, combining the sequences of p-ITIM and the N-terminal tyrosine phosphorylated motif of SHIP with a flexible spacer. This compound bound to the recombinant SH2 domains of SHP-2 with high affinity and activated the phosphatase in an in vitro assay. These data suggest that the phosphorylated FcgammaRII-SHIP complexes formed in the intact cells may also activate SHP-2. Grb2-associated binder 1 (Gab1) is a multisite docking protein, which becomes tyrosine-phosphorylated in response to various types of signaling, including BCR. In turn it binds to the SH2 domains of SHP-2, SHIP and the p85 subunit of phosphatidyl inositol 3-kinase (PtdIns3-K) and may regulate their activity. Gab1 is a potential substrate of SHP-2, thus its binding to FcgammaRIIb may modify the Gab1-bound signaling complex. We show here that Gab1 is part of the multiprotein complex assembled by FcgammaRIIb upon its co-clustering with BCR. Gab1 may recruit SH2 domain-containing molecules to the phosphorylated FcgammaRIIb. SHP-2, activated upon the binding to FcgammaRIIb-SHIP complex, partially dephosphorylates Gab1, resulting in the release of PtdIns3-K and ultimately in the inhibition of downstream activation pathways in BCR/FcgammaRIIb co-aggregated cells.     

Molecular events associated with CD4-mediated Down-regulation of LFA-1-dependent adhesion.

We have previously shown that CD4 ligand binding inhibits LFA-1-dependent adhesion between CD4+ T cells and B cells in a p56(lck)- and phosphatidylinositol 3-kinase (PI3-kinase)-dependent manner. In this work, downstream events associated with adhesion inhibition have been investigated. By using HUT78 T cell lines, CD4 ligands were shown to induce a dissociation of LFA-1 from cytohesin, a cytoplasmic protein known to bind LFA-1 and to enhance the affinity/avidity of LFA-1 for its ligand ICAM-1. A dissociation of PI3-kinase from cytohesin is also observed. In parallel, we have found that CD4 ligand binding induced a redistribution of PI3-kinase and of the tyrosine phosphatase SHP-2 to the membrane and induced a transient formation of protein interactions including PI3-kinase; an adaptor protein, Gab2; SHP-2; and a SH2 domain-containing inositol phosphatase, SHIP. By using antisense oligonucleotides or transfection of transdominant mutants, down-regulation of adhesion was shown to require the Gab2/PI3-kinase association and the expression of SHIP and SHP-2. We therefore propose that CD4 ligands, by inducing these molecular associations, lead to sustained local high levels of D-3 phospholipids and possibly regulate the cytohesin/LFA-1 association.     

SH2 domains from suppressor of cytokine signaling-3 and protein tyrosine phosphatase SHP-2 have similar binding specificities

Suppressor of cytokine signaling-3 (SOCS-3) and the protein tyrosine phosphatase SHP-2 both regulate signaling by cytokines of the interleukin-6 family, and this is dependent upon recruitment to tyrosine 757 in the shared cytokine receptor subunit gp130. To better explore the overlap in ligand binding specificities exhibited by these two signaling regulators, we have mapped the phosphopeptide binding preferences of the SH2 domains from SOCS-3 and SHP-2. Degenerate phosphopeptide libraries were screened against recombinantly produced SH2 domains to determine the sequences of optimal phosphopeptide ligands. We found that the consensus ligand binding motif for SOCS-3 was pY-(S/A/V/Y/F)-hydrophobic-(V/I/L)-hydrophobic-(H/V/I/Y), while the consensus motif for SHP-2 was pY-(S/T/A/V/I)-X-(V/I/L)-X-(W/F). We validated these data through the design of phosphopeptide ligands based on the consensus motifs and found that these bound to SOCS-3 and SHP-2 with high affinity. Finally, we have compared the affinity of SOCS-3 for binding to phosphopeptides representing putative docking sites in the gp130, leptin and erythropoietin receptors. While SOCS-3 binds with much higher affinity to a gp130 phosphopeptide than to phosphopeptides derived from the other receptors, multiple SOCS-3 binding sites are predicted to exist in the leptin and erythropoietin receptors which may compensate for weaker binding to individual sites.     

Dissecting the interaction of SHP-2 with PZR, an immunoglobulin family protein containing immunoreceptor tyrosine-based inhibitory motifs

Tyrosine phosphorylation of membrane proteins plays a crucial role in cell signaling by recruiting Src homology 2 (SH2) domain-containing signaling molecules. Recently, we have isolated a transmembrane protein designated PZR that specifically binds tyrosine phosphatase SHP-2, which has two SH2 domains (Zhao, Z. J., and Zhao, R. (1998) J. Biol. Chem. 273, 29367-29372). PZR belongs to the immunoglobulin superfamily. Its intracellular segment contains four putative sites of tyrosine phosphorylation. By site-specific mutagenesis, we found that the tyrosine 241 and 263 embedded in the consensus immunoreceptor tyrosine-based inhibitory motifs VIYAQL and VVYADI, respectively, accounted for the entire tyrosine phosphorylation of PZR. The interaction between PZR and SHP-2 requires involvement of both tyrosyl residues of the former and both SH2 domains of the latter, since its was disrupted by mutating a single tyrosyl residue or an SH2 domain. Overexpression of catalytically inactive but not active forms of SHP-2 bearing intact SH2 domains in cells caused hyperphosphorylation of PZR. In vitro, tyrosine-phosphorylated PZR was efficiently dephosphorylated by the full-length form of SHP-2 but not by its SH2 domain-truncated form. Together, the data indicate that PZR serves not only as a specific anchor protein of SHP-2 on the plasma membrane but also as a physiological substrate of the enzyme. The coexisting binding and dephosphorylation of PZR by SHP-2 may function to terminate signal transduction initiated by PZR and SHP-2 and to set a threshold for the signal transduction to be initiated.     

SHP-1 Binds and Negatively Modulates the c-Kit Receptor by Interaction with Tyrosine 569 in the c-Kit Juxtamembrane Domain

The SH2 domain-containing SHP-1 tyrosine phosphatase has been shown to negatively regulate a broad spectrum of growth factor- and cytokine-driven mitogenic signaling pathways. Included among these is the cascade of intracellular events evoked by stem cell factor binding to c-Kit, a tyrosine kinase receptor which associates with and is dephosphorylated by SHP-1. Using a series of glutathione S-transferase (GST) fusion proteins containing either tyrosine-phosphorylated segments of the c-Kit cytosolic region or the SH2 domains of SHP-1, we have shown that SHP-1 interacts with c-Kit by binding selectively to the phosphorylated c-Kit juxtamembrane region and that the association of c-Kit with the larger of the two SHP-1 isoforms may be mediated through either the N-terminal or C-terminal SHP-1 SH2 domain. The results of binding assays with mutagenized GST-Kit juxtamembrane fusion proteins and competitive inhibition assays with phosphopeptides encompassing each c-Kit juxtamembrane region identified the tyrosine residue at position 569 as the major site for binding of SHP-1 to c-Kit and suggested that tyrosine 567 contributes to, but is not required for, this interaction. By analysis of Ba/F3 cells retrovirally transduced to express c-Kit receptors, phenylalanine substitution of c-Kit tyrosine residue 569 was shown to be associated with disruption of c-Kit–SHP-1 binding and induction of hyperproliferative responses to stem cell factor. Although phenylalanine substitution of c-Kit tyrosine residue 567 in the Ba/F3–c-Kit cells did not alter SHP-1 binding to c-Kit, the capacity of a second c-Kit-binding tyrosine phosphatase, SHP-2, to associate with c-Kit was markedly reduced, and the cells again showed hyperproliferative responses to stem cell factor. These data therefore identify SHP-1 binding to tyrosine 569 on c-Kit as an interaction pivotal to SHP-1 inhibitory effects on c-Kit signaling, but they indicate as well that cytosolic protein tyrosine phosphatases other than SHP-1 may also negatively regulate the coupling of c-Kit engagement to proliferation.     

Determination of the binding specificity of the SH2 domains of protein tyrosine phosphatase SHP-1 through the screening of a combinatorial phosphotyrosyl peptide library

A method for the rapid identification of high-affinity ligands to Src homology-2 (SH2) domains is reported. A phosphotyrosyl (pY) peptide library containing completely randomized residues at positions -2 to +3 relative to the pY was synthesized on TentaGel resin, with a unique peptide sequence on each resin bead (total 2.5 x 10(6) different sequences). The library was screened against the biotinylated N- and C-terminal SH2 domains of protein tyrosine phosphatase SHP-1, and the beads that carry high-affinity ligands of the SH2 domains were identified using an enzyme-linked assay involving a streptavidin-alkaline phosphatase conjugate. Peptide ladder sequencing of the selected beads using matrix-assisted laser desorption ionization mass spectrometry revealed consensus sequences for both SH2 domains. The N-terminal SH2 domain strongly selects for peptides with a leucine at the -2 position; at the C-terminal side of the pY residue, it can recognize two distinct classes of peptides with consensus sequences of LXpY(M/F)X(F/M) and LXpYAXL (X = any amino acid), respectively. The C-terminal SH2 domain exhibits almost exclusive selectivity for peptides of the consensus sequence, (V/I/L)XpYAX(L/V). Several representative sequences selected from the library were individually synthesized and tested for binding to the SH2 domains by surface plasmon resonance and for their ability to stimulate the catalytic activity of SHP-1. Both experiments have demonstrated that the selected peptides are capable of binding to the SH2 domains with dissociation constants (K(D)) in the low micromolar range.     

SAP couples Fyn to SLAM immune receptors

SAP (SLAM-associated protein) is a small lymphocyte-specific signalling molecule that is defective or absent in patients with X-linked lymphoproliferative syndrome (XLP). Consistent with its single src homology 2 (SH2) domain architecture and unusually high affinity for SLAM (also called CD150), SAP has been suggested to function by blocking binding of SHP-2 or other SH2-containing signalling proteins to SLAM receptors. Additionally, SAP has recently been shown to be required for recruitment and activation of the Src-family kinase FynT after SLAM ligation. This signalling 'adaptor' function has been difficult to conceptualize, because unlike typical SH2-adaptor proteins, SAP contains only a single SH2 domain and lacks other recognized protein interaction domains or motifs. Here, we show that the SAP SH2 domain binds to the SH3 domain of FynT and directly couples FynT to SLAM. The crystal structure of a ternary SLAM-SAP-Fyn-SH3 complex reveals that SAP binds the FynT SH3 domain through a surface-surface interaction that does not involve canonical SH3 or SH2 binding interactions. The observed mode of binding to the Fyn-SH3 domain is expected to preclude the auto-inhibited conformation of Fyn, thereby promoting activation of the kinase after recruitment. These findings broaden our understanding of the functional repertoire of SH3 and SH2 domains.     

Analysis of SHP-1-mediated down-regulation of the TRK-T3 oncoprotein identifies Trk-fused gene (TFG) as a novel SHP-1-interacting protein

SHP-1 is a cytoplasmic SH2 domain containing protein-tyrosine phosphatase (PTP) involved in the negative regulation of multiple signaling pathways in hematopoietic, nervous, and epithelial cells. The thyroid TRK-T3 oncogene consists of the NTRK1 tyrosine kinase domain fused in-frame with sequences of the TFG (TRK-fused gene), encoding a protein of unknown function. TFG contains a coiled-coil domain responsible for TRK-T3 oligomerization. In addition, recent analysis of the sequences outside of the coiled-coil domain suggested possible interactions with other proteins. Based on the presence of a putative SHP-1 SH2-binding site within the TFG sequences, we have investigated the role of the SHP-1 phosphatase in TRK-T3 oncoprotein signaling. In this study we show that SHP-1 interacts with and down-regulates TRK-T3. We provide evidence that SHP-1 SH2 and catalytic domains, respectively, associate with the TFG- and NTRK1-derived portions of TRK-T3. Our data contribute to the definition of cellular mechanisms involved in thyroid tumorigenesis. Moreover, it reveals TFG as a novel protein able to modulate SHP-1 activity.     

Structural Determinants of SHP-2 Function and Specificity in Xenopus Mesoderm Induction

SHP-2 is a positive component of many receptor tyrosine kinase signaling pathways. The related protein-tyrosine phosphatase (PTP) SHP-1 usually acts as a negative regulator. The precise domains utilized by SHP-2 to transmit positive signals in vivo and the basis for specificity between SHP-1 and SHP-2 are not clear. In Xenopus, SHP-2 is required for mesoderm induction and completion of gastrulation. We investigated the effects of SHP-2 mutants and SHP-2/SHP-1 chimeras on basic fibroblast growth factor-induced mesoderm induction. Both SH2 domains and the PTP domain are required for normal SHP-2 function in this pathway. The N-terminal SH2 domain is absolutely required, whereas the C-terminal SH2 contributes to wild-type function. The C-terminal tyrosyl phosphorylation sites and proline-rich region are dispensable, arguing against adapter models of SHP-2 function. Although the SH2 domains contribute to SHP-2 specificity, studies of SHP chimeras reveal that substantial specificity resides in the PTP domain. Thus, PTP domains exhibit biologically relevant specificity in vivo, and noncatalytic and catalytic domains of PTPs contribute to specificity in a combinatorial fashion.