We have investigated the regulation of protein tyrosine phosphatases (PTPs) by reactive oxygen species (ROS) in a cellular environment. We demonstrate that multiple PTPs were reversibly oxidized and inactivated following treatment of Rat-1 cells with H₂O₂ and that inhibition of PTP function was important for ROS-induced mitogenesis. Furthermore, we show transient oxidation of the SH2 domain containing PTP, SHP-2, in response to PDGF that requires association with the PDGFR. Our results indicate that SHP-2 inhibits PDGFR signaling and suggest a mechanism by which autophosphorylation of the PDGFR occurs despite its association with SHP-2. The data suggest that several PTPs may be regulated by oxidation and that characterization of this process may define novel links between specific PTPs and particular signaling pathways in vivo.