Asthma is a chronic inflammatory disease in which airway epithelial cells are the first line of defense against exposure of the airway to infectious agents. Src homology protein (SHP)-1, a protein tyrosine phosphatase, is a negative regulator of signaling pathways that are critical to the development of asthma and host defense. We hypothesize that SHP-1 function is defective in asthma, contributing to the increased inflammatory response induced by Mycoplasma pneumoniae, a pathogen known to exacerbate asthma. M. pneumoniae significantly activated SHP-1 in airway epithelial cells collected from nonasthmatic subjects by bronchoscopy with airway brushing but not in cells from asthmatic subjects. In asthmatic airway epithelial cells, M. pneumoniae induced significant PI3K/Akt phosphorylation, NF-κB activation, and IL-8 production compared with nonasthmatic cells, which were reversed by SHP-1 overexpression. Conversely, SHP-1 knockdown significantly increased IL-8 production and PI3K/Akt and NF-κB activation in the setting of M. pneumoniae infection in nonasthmatic cells, but it did not exacerbate these three parameters already activated in asthmatic cells. Thus, SHP-1 plays a critical role in abrogating M. pneumoniae-induced IL-8 production in nonasthmatic airway epithelial cells through inhibition of PI3K/Akt and NF-κB activity, but it is defective in asthma, resulting in an enhanced inflammatory response to infection.