Shp-2, a src homology (SH)2-containing phosphotyrosine phosphatase, appears to be involved in cytoplasmic signaling downstream of a variety of cell surface receptors, although the mechanism is unclear. Here, we have determined a role of Shp-2 in the cytokine circuit for inflammatory and immune responses. Production of interleukin (IL)-6 in response to IL-1α or tumor necrosis factor (TNF)-α was nearly abolished in homozygous mutant (Shp-2^−/−) fibroblast cells. The targeted Shp-2 mutation has no significant effect on the activation of the three types of mitogen-activated protein (MAP) kinases, extracellular signal-regulated kinase (Erk), c-Jun NH₂-terminal kinase (Jnk), and p38, by IL-1/TNF, indicating that Shp-2 does not work through MAP kinase pathways in mediating IL-1/TNF-induced IL-6 synthesis. In contrast, IL-1/TNF-stimulated nuclear factor (NF)-κB DNA binding activity and inhibitor of κB (IκB) phosphorylation was dramatically decreased in Shp-2^−/− cells, while the expression and activity of NF-κB–inducing kinase (NIK), Akt, and IκB kinase (IKK) were not changed. Reintroduction of a wild-type Shp-2 protein into Shp-2^−/− cells rescued NF-κB activation and IL-6 production in response to IL-1/TNF stimulation. Furthermore, Shp-2 tyrosine phosphatase was detected in complexes with IKK as well as with IL-1 receptor. Thus, this SH2-containing enzyme is an important cytoplasmic factor required for efficient NF-κB activation. These results elucidate a novel mechanism of Shp-2 in cytokine signaling by specifically modulating the NF-κB pathway in a MAP kinase–independent fashion.