It has been postulated that PtdIns(3,4) P (2), one of the immediate breakdown products of PtdIns(3,4,5) P (3), functions as a signalling molecule in insulin- and growth-factor-stimulated pathways. To date, the t andem- P H-domain-containing p rotein- 1 (TAPP1) and related TAPP2 are still the only known PH-domain-containing proteins that interact strongly and specifically with PtdIns(3,4) P (2). In this study we demonstrate that endogenously expressed TAPP1, is constitutively associated with the protein-tyrosine-phosphatase-like protein-1 (PTPL1 also known as FAP-1). We show that PTPL1 binds to TAPP1 and TAPP2, principally though its first PDZ domain [where PDZ is postsynaptic density protein ( P SD-95)/ Drosophila disc large tumour suppressor ( d lg)/tight junction protein ( Z O1)] and show that this renders PTPL1 capable of associating with PtdIns(3,4) P (2) in vitro. Our data suggest that the binding of TAPP1 to PTPL1 does not influence PTPL1 phosphatase activity, but instead functions to maintain PTPL1 in the cytoplasm. Following stimulation of cells with hydrogen peroxide to induce PtdIns(3,4) P (2) production, PTPL1, complexed to TAPP1, translocates to the plasma membrane. This study provides the first evidence that TAPP1 and PtdIns(3,4) P (2) could function to regulate the membrane localization of PTPL1. We speculate that if PTPL1 was recruited to the plasma membrane by increasing levels of PtdIns(3,4) P (2), it could trigger a negative feedback loop in which phosphoinositide-3-kinase-dependent or other signalling pathways could be switched off by the phosphatase-catalysed dephosphorylation of receptor tyrosine kinases or tyrosine phosphorylated adaptor proteins such as IRS1 or IRS2. Consistent with this notion we observed RNA-interference-mediated knock-down of TAPP1 in HEK-293 cells, enhanced activation and phosphorylation of PKB following IGF1 stimulation.