Dual-specific protein-tyrosine phosphatases have the common active-site sequence motif HCXXGXXRS(T). The role of the conserved hydroxyl was investigated by changing serine-131 to an alanine (S131A) in the dual-specific protein-tyrosine phosphatase VHR. The pH profile of the kcat/Km value for the S131A mutant is indistinguishable from that of the native enzyme. In contrast, the kcat value for S131A mutant is 100-fold lower than that for the native enzyme, and the shape of the pH profile was perturbed from bell-shaped in the native enzyme to a pH-independent curve over the pH range 4.5-9.0. This evidence, along with results from a previous study, suggests that the S131A mutation alters the rate-limiting step in the catalytic mechanism. Formation of a phosphoenzyme intermediate appears to be rate-limiting with the native enzyme, whereas in the S131A mutant breakdown of the intermediate is rate-limiting. This was confirmed by the appearance of a burst of p-nitrophenol formation when p-nitrophenyl phosphate rapidly reacted with the S131A enzyme in a stopped-flow spectrophotometer. Loss of this hydroxyl group at the active site dramatically diminished the ability of the enzyme to hydrolyze the thiol-phosphate intermediate without exerting any significant change in the steps leading to and including the formation of the intermediate. Consistent with rate-limiting intermediate formation in the native enzyme, the rate of burst in the S131A mutant was 1.5 s-1, which agrees well with the kcat value of 5 s-1 observed for native enzyme. The amplitude of the burst was stoichiometric with final enzyme concentration, and the slow linear rate (0.06 s-1) of p-nitrophenol formation after the burst was in agreement with the steady-state determined value of kcat (0.055 s-1).