Etk, also named Bmx, is a member of the Tec tyrosine kinase family, which is characterized by a multimodular structure including a pleckstrin homology (PH) domain, an SH3 domain, an SH2 domain, and a catalytic domain. The signaling mechanisms regulating Etk kinase activity remain largely unknown. To identify factor(s) regulating Etk activity, we used the PH domain and a linker region of Etk as a bait for a yeast two-hybrid screen. Three independent clones encoding protein-tyrosine phosphatase D1 (PTPD1) fragments were isolated. The binding of PTPD1 to Etk is specific since PTPD1 cannot associate with either the Akt PH domain or lamin. In vitro and in vivo binding studies demonstrated that PTPD1 can interact with Etk and that residues 726-848 of PTPD1 are essential for this interaction. Deletion analysis of Etk indicated that the PH domain is essential for PTPD1 interaction. Furthermore, the Etk-PTPD1 interaction stimulated the kinase activity of Etk, resulting in an increased phosphotyrosine content in both factors. The Etk-PTPD1 interaction also increased Stat3 activation. The effect of PTPD1 on Etk activation is specific since PTPD1 cannot potentiate Jak2 activity upon Stat3 activation. In addition, Tec (but not Btk) kinase can also be activated by PTPD1. Taken together, these findings indicate that PTPD1 can selectively associate with and stimulate Tec family kinases and modulate Stat3 activation.