During development of the vertebrate vascular system essential signals are transduced via protein-tyrosine phosphorylation. Null-mutations of receptor-tyrosine kinase (RTK) genes expressed in endothelial cells (ECs) display early lethal vascular phenotypes. We aimed to identify endothelial protein-tyrosine phosphatases (PTPs), which should have similar importance in EC-biology. A murine receptor-type PTP was identified by a degenerated PCR cloning approach from endothelial cells (VE-PTP). By in situ hybridization this phosphatase was found to be specifically expressed in vascular ECs throughout mouse development. In experiments using GST-fusion proteins, as well as in transient transfections, trapping mutants of VE-PTP co-precipitated with the Angiopoietin receptor Tie-2, but not with the Vascular Endothelial Growth Factor receptor 2 (VEGFR-2/Flk-1). In addition, VE-PTP dephosphorylates Tie-2 but not VEGFR-2. We conclude that VE-PTP is a Tie-2 specific phosphatase expressed in ECs, and VE-PTP phosphatase activity serves to specifically modulate Angiopoietin/Tie-2 function. Based on its potential role as a regulator of blood vessel morphogenesis and maintainance, VE-PTP is a candidate gene for inherited vascular malformations similar to the Tie-2 gene.