Sodium butyrate-induced differentiation of breast cancer cell lines was used to identify protein tyrosine phosphatases (PTPs) involved in differentiation and growth inhibition of breast cancer cells. Of 42 PTPs analyzed, 31 were expressed in the ZR75-1 breast cancer cell line. Expression of four PTPs (DEP-1, SAP, PTP gamma, and PAC) was regulated in ZR75-1 cells undergoing differentiation. Expression of two of these PTPs (DEP-1 and SAP) was also regulated in the SKBr-3 cell line undergoing differentiation. In view of its marked induction with differentiation in an estrogen receptor (ER)-positive and an ER-negative breast cancer cell line, DEP-1 was investigated for a role in growth inhibition or induction of differentiation in breast cancer cells. A DEP-1 cDNA construct under control of a constitutively active cytomegalovirus promoter was transfected into the ZR75-1, SKBR-3, and MCF-7 breast cancer cell lines, and resistant colonies were selected with G418. DEP-1 expression inhibited the development of resistant colonies by 3-5-fold in all three lines compared to transfection with vector alone. Three stable MCF-7 cell lines expressing DEP-1 under control of an inducible metallothionein promoter were then established. In these lines, induction of DEP-1 expression inhibited breast cancer cell growth by 5-10-fold. These data describe PTPs expressed and regulated in breast cancer cell lines during differentiation and identify one PTP, DEP-1, that inhibits the growth of breast cancer cells in vitro.