Coligation of paired immunoglobulin-like receptor B (PIR-B) with B cell antigen receptor (BCR) blocks antigen-induced B cell activation. This inhibition is mediated in part by recruitment of SHP-1 and SHP-2 to the phosphorylated ITIMs in the cytoplasmic domain of PIR-B; however the molecular target (s) of these phosphatases remain elusive. Here we show that PIR-B ligation inhibits the BCR-induced tyrosine phosphorylation of Igα/Igβ, Syk, Btk and phospholipase C (PLC)-γ2. Overexpression of a catalytically inactive form of SHP-1 prevents the PIR-B-mediated inhibition of tyrosine phosphorylation of Syk, Btk, and PLC-γ2. Dephosphorylation of Syk and Btk mediated by SHP-1 leads to a decrease of their kinase activity, which in turn inhibits tyrosine phosphorylation of PLC-γ2. Furthermore, we define a requirement for Lyn in mediating tyrosine phosphorylation of PIR-B. Based on these results, we propose a model of PIR-B-mediated inhibitory signaling in which coligation of PIR-B and BCR results in phosphorylation of ITIMs by Lyn, subsequent recruitment of SHP-1, and a resulting inhibition of the BCR-induced inositol 1, 4, 5-trisphosphate generation by dephosphorylation of Syk and Btk.