Previously, we showed that Abl family tyrosine kinases are activated by growth factors, and Abl is required for transition from G1 to S phase during PDGF-mediated proliferation. Here, we show that the SHP-2 tyrosine phosphatase, which acts to promote proliferation in response to cytokines and growth factors, is a novel substrate of endogenous Abl kinases during growth factor-mediated cellular proliferation. Using a pharmacological inhibitor and RNAi, we show that endogenous Abl kinases phosphorylate SHP-2 on Y580, and induce sustained activation of ERK kinases in response to growth factor stimulation in fibroblasts. Consistent with these data, SHP-2 is required for Abl-dependent PDGF-mediated proliferation since expression of an activated form of SHP-2 rescues the ability of Abl-Arg null fibroblasts to transit from G1 to S phase, whereas inhibition of SHP-2 signaling reduces the ability of Abl kinases to rescue the proliferation defect. Abl kinases also indirectly mediate phosphorylation of SHP-2 on Y63 and Y279, which are frequent sites of germline mutation in two cancer susceptibility syndromes. Significantly, we demonstrate that phosphorylation of SHP-2 on Y279 downregulates growth factor-induced sustained ERK activation and proliferation, supporting a role for Abl kinases not only in potentiating growth factor-mediated SHP-2 signaling, but also in negative-feedback regulation.