In the context of fibroblast growth factor (FGF) signaling, Sprouty2 (Spry2) is the most profound inhibitor of the Ras/ERK pathway as compared with other Spry isoforms. An exclusive, necessary, but cryptic PXXPXR motif in the C terminus of Spry2 is revealed upon stimulation. The activation of Spry2 appears to be linked to sequences in the N-terminal half of the protein and correlated with a bandshifting seen on SDS-PAGE. The band-shifting is likely caused by changes in the phosphorylation status of key Ser and Thr residues following receptor stimulation. Dephosphorylation of at least two conserved Ser residues (Ser-112 and Ser-115) within a conserved Ser/Thr sequence is accomplished upon stimulation by a phosphatase that binds to Spry2 around residues 50-60. We show that human Spry2 co-immunoprecipitates with both the catalytic and the regulatory subunits of protein phosphatase 2A (PP2A-C and PP2A-A, respectively) in cells upon FGF receptor (FGFR) activation. PP2A-A binds directly to Spry2, but not to Spry2Delta50-60 (Delta50-60), and the activity of PP2A increases with both FGF treatment and FGFR1 overexpression. c-Cbl and PP2A-A compete for binding centered around Tyr-55 on Spry2. We show that there are at least two distinct pools of Spry2, one that binds PP2A and another that binds c-Cbl. c-Cbl binding likely targets Spry2 for ubiquitin-linked destruction, whereas the phosphatase binding and activity are necessary to dephosphorylate specific Ser/Thr residues. The resulting change in tertiary structure enables the Pro-rich motif to be revealed with subsequent binding of Grb2, a necessary step for Spry2 to act as a Ras/ERK pathway inhibitor in FGF signaling.