DNA damage induced by radiation or DNA-damaging agents leads to apoptosis and cell cycle arrest. However, DNA damage-triggered signal transduction involved in these cellular responses is not well understood. We previously demonstrated an important role for SHP-2, a ubiquitously expressed SH2 domain-containing tyrosine phosphatase, in the DNA damage-induced apoptotic response. Here we report a potential role for SHP-2 in a DNA damage-activated cell cycle checkpoint. Cell cycle analysis and the mitotic index assay showed that following DNA damage induced by cisplatin or gamma-irradiation, the G2 (but not S) arrest response was diminished in SV40 large T antigen-immortalized embryonic fibroblast cells lacking functional SHP-2. Notably, reintroduction of wild-type SHP-2 into the mutant cells fully restored the DNA damage-induced G2 arrest response, suggesting a direct role of SHP-2 in the G2/M checkpoint. Further biochemical analysis revealed that SHP-2 constitutively associated with 14-3-3beta, and that Cdc25C cytoplasmic translocation induced by DNA damage was essentially blocked in SHP-2 mutant cells. Additionally, we showed that following DNA damage, activation of p38 kinase was significantly elevated, while Erk kinase activation was decreased in mutant cells, and treatment of SHP-2 mutant cells with SB203580, a selective inhibitor for p38 kinase, partially restored the DNA damage-induced G2 arrest response. These results together provide the first evidence that SHP-2 tyrosine phosphatase enhances the DNA damage G2/M checkpoint in SV40 large T antigen immortalized murine embryonic fibroblast cells.