Siglec-7 and Siglec-9 are two members of the recently characterized CD33-related Siglec family of sialic acid binding proteins and are both expressed on human monocytes and NK cells. In addition to their ability to recognize sialic acid residues, these Siglecs display two conserved tyrosine-based motifs in their cytoplasmic region similar to those found in inhibitory receptors of the immune system. In the present study, we use the rat basophilic leukemia (RBL) model to examine the potential of Siglecs-7 and-9 to function as inhibitory receptors and investigate the molecular basis for this. We first demonstrate that Siglecs-7 and-9 are able to inhibit the FcεRI-mediated serotonin release from RBL cells following co-crosslinking. In addition, we show that under these conditions or after pervanadate treatment, Siglecs-7 and-9 associate with the Src homology region 2 domain-containing phosphatases (SHP), SHP-1 and SHP-2, both in immunoprecipitation and in fluorescence microscopy experiments using GFP fusion proteins. We then show by site-directed mutagenesis that the membrane-proximal tyrosine motif is essential for the inhibitory function of both Siglec-7 and-9, and is also required for tyrosine phosphorylation and recruitment of SHP-1 and SHP-2 phosphatases. Finally, mutation of the membrane-proximal motif increased the sialic acid binding activity of Siglecs-7 and-9, raising the possibility that “inside-out” signaling may occur to regulate ligand binding.