Functional inactivation of the protein tyrosine phosphatase DEP-1 leads to increased endothelial cell proliferation and failure of vessels to remodel and branch. DEP-1 has also been proposed to contribute to the contact inhibition of endothelial cell growth via dephosphorylation of vascular endothelial growth factor receptor 2 (VEGFR2), a mediator of vascular development. However, how DEP-1 regulates VEGF-dependent signaling and biological responses remains ill-defined. We show here that DEP-1 targets tyrosine residues in the VEGFR2 kinase activation loop. Consequently, depletion of DEP-1 results in the increased phosphorylation of all major VEGFR2 autophosphorylation sites, but surprisingly, not in the overall stimulation of VEGF-dependent signaling. The increased phosphorylation of Src on Y529 under these conditions results in impaired Src and Akt activation. This inhibition is similarly observed upon expression of catalytically inactive DEP-1, and coexpression of an active Src-Y529F mutant rescues Akt activation. Reduced Src activity correlates with decreased phosphorylation of Gab1, an adapter protein involved in VEGF-dependent Akt activation. Hypophosphorylated Gab1 is unable to fully associate with phosphatidylinositol 3-kinase, VEGFR2, and VE-cadherin complexes, leading to suboptimal Akt activation and increased cell death. Overall, our results reveal that despite its negative role on global VEGFR2 phosphorylation, DEP-1 is a positive regulator of VEGF-mediated Src and Akt activation and endothelial cell survival.