To clarify the role of protein-tyrosine phosphatase (PTPase) containing Src homology 2 regions (SHPTP2) in insulin signaling, either wild-type or mutant SHPTP2 (delta PTP; lacking full PTPase domain) was expressed in Rat 1 fibroblasts overexpressing human insulin receptors. In response to insulin, phosphorylation of insulin receptor substrate 1 (IRS-1), IRS-1-associated PTPase activities and phosphatidylinositol (PI) 3'-kinase activities were slightly enhanced in wild-type cells when compared with those in the parent cells transfected with hygromycin-resistant gene alone. In contrast, introduction of delta PTP inhibited insulin-induced association of IRS-1 with endogenous SHPTP2 and impaired both insulin-stimulated phosphorylation of IRS-1 and activation of PI 3'-kinase. Furthermore, decreased content of p85 subunit of PI 3'-kinase was also found in mutant cells. Consistently, the insulin-stimulated mitogen-activated protein kinase activities and DNA synthesis were also enhanced in wild-type cells, but impaired in mutant cells. Thus, the interaction of SHPTP2 with IRS-1 may be associated with modulation of phosphorylation levels of IRS-1, resulting in the changes of PI 3'-kinase and mitogen-activated protein kinase activity. Furthermore, an impaired insulin signaling in mutant cells may be partly reflected in a decreased content of p85 protein of PI 3'-kinase.