CD45 is a major membrane protein tyrosine phosphatase (PTP) expressed in T cells where it regulates the activity of Lck, a Src family kinase important for T cell receptor-mediated activation. PTPalpha is a more widely expressed transmembrane PTP that has been shown to regulate the Src family kinases, Src and Fyn, and is also present in T cells. Here, PTPalpha was phosphorylated at Tyr-789 in CD45(-) T cells but not in CD45(+) T cells suggesting that CD45 could regulate the phosphorylation of PTPalpha at this site. Furthermore, CD45 could directly dephosphorylate PTPalpha in vitro. Expression of PTPalpha and PTPalpha-Y789F in T cells revealed that the mutant had a reduced ability to decrease Fyn and Cbp phosphorylation, to regulate the kinase activity of Fyn, and to restore T cell receptor-induced signaling events when compared with PTPalpha. Conversely, this mutant had an increased ability to prevent Pyk2 phosphorylation and CD44-mediated cell spreading when compared with PTPalpha. These data demonstrate distinct activities of PTPalpha and PTPalpha-Y789F in T cells and identify CD45 as a regulator of PTPalpha phosphorylation at tyrosine 789 in T cells.