Protein tyrosine phosphorylation is regulated by protein tyrosine kinase and protein tyrosine phosphatase activities. These two counteracting proteins are implicated in cell growth and transformation. Using polymerase chain reaction with degenerate primers, we have identified a novel mouse protein tyrosine phosphatase (PTP). This cDNA contains a single open reading frame of the predicted 926 amino acids. Those predicted amino acids showed significant identity with human megakaryocyte protein-tyrosine phosphatase by 91% in nucleotide sequences and 94% in amino acid sequences. We have identified that expression of this PTP is highly enriched in the testis in mouse and human and has been termed here as a 'testis-enriched phosphatase' (TEP). Northern analysis detected two mRNA species of 3.7 and 3.2kb for this PTP in mouse testis and the expression of TEP is regulated during development. The recombinant phosphatase domain possesses protein tyrosine phosphatase activity when expressed in Escherichia coli. Immunohistochemical analysis of the cellular localization of TEP on mouse testis sections showed that this PTP is specifically expressed in spermatocytes and spermatids within seminiferous tubules, suggesting an important role in spermatogenesis.