To clarify the role that the src homology 2-containing inositol phosphatase (SHIP) plays in mast cell degranulation, the gene for SHIP was disrupted by homologous recombination in embryonic stem cells. Bone-marrow-derived mast cells from SHIP+/+, +/−, and −/− F₂ littermates were compared. SHIP−/− mast cells were found to be far more prone to degranulation, after the crosslinking of IgE preloaded cells, than SHIP+/− or +/+ cells. Intriguingly, IgE alone also stimulated massive degranulation in SHIP−/− but not in +/+ mast cells. This degranulation with IgE alone, which may be due to low levels of IgE aggregates, correlated with a higher and more sustained intracellular calcium level than that observed with SHIP+/+ cells and was dependent upon the entry of extracellular calcium. Immunoprecipitation studies revealed that the addition of IgE alone to normal mast cells stimulates multiple cascades, which are prevented from progressing to degranulation by SHIP. PI 3-kinase inhibitor studies suggested that IgE-induced activation of PI 3-kinase is upstream of the entry of extracellular calcium and that SHIP restricts this entry by hydrolyzing phosphatidylinositol 3,4,5-trisphosphate. These results show the critical role that SHIP plays in setting the threshold for degranulation and that SHIP directly modulates a “positive-acting” receptor.