There are two major isoforms of the angiotensin II receptor, type 1 (AT1) and type 2 (AT2). AT2 is distinguished from AT1 with respect to its ligand selectivity, its insensitivity to non-hydrolyzable GTP analogues, and its as yet unidentified biological functions. In the present study we have expression-cloned AT2 cDNA from a cDNA library of a rat pheochromocytoma cell line (PC12w). Rat AT2 cDNA encodes a 363-amino acid protein that has seven transmembrane domains. AT1 is the closest in homology to AT2 but with only a 32% identity of amino acid sequence. Stably expressed in COS-7 cells, the receptor showed selective binding to AT2-specific ligands PD123319 and CGP42112A but not to the AT1-specific ligand, losartan. Northern blot analysis revealed that the mRNA of rat AT2 was expressed not only in PC12w cells but also in the adrenal glands and in the inferior olive of the brain, both of which are known to contain AT2 type binding sites. The expressed AT2 receptor mediated angiotensin II-induced inhibition of protein tyrosine phosphatase, an action that was dependent on a pertussis toxin-sensitive G-protein-coupled mechanism in COS-7 cells. The AT2-specific ligand CGP42112A was an agonist rather than antagonist in the inhibition of phosphotyrosine phosphatase. AT2 did not cause a decrease in cGMP in PC12w or COS-7 cells expressing AT2 stably. These results indicate that the AT2 receptor is structurally and functionally different from AT1 and suggest novel functional roles of the renin-angiotensin system in cross-talk with phosphotyrosine signaling by modulating protein phosphotyrosine levels.