The SH2 domain-containing SHP-1 tyrosine phosphatase has been shown to negatively regulate a broad spectrum of growth factor- and cytokine-driven mitogenic signaling pathways. Included among these is the cascade of intracellular events evoked by stem cell factor binding to c-Kit, a tyrosine kinase receptor which associates with and is dephosphorylated by SHP-1. Using a series of glutathione S-transferase (GST) fusion proteins containing either tyrosine-phosphorylated segments of the c-Kit cytosolic region or the SH2 domains of SHP-1, we have shown that SHP-1 interacts with c-Kit by binding selectively to the phosphorylated c-Kit juxtamembrane region and that the association of c-Kit with the larger of the two SHP-1 isoforms may be mediated through either the N-terminal or C-terminal SHP-1 SH2 domain. The results of binding assays with mutagenized GST-Kit juxtamembrane fusion proteins and competitive inhibition assays with phosphopeptides encompassing each c-Kit juxtamembrane region identified the tyrosine residue at position 569 as the major site for binding of SHP-1 to c-Kit and suggested that tyrosine 567 contributes to, but is not required for, this interaction. By analysis of Ba/F3 cells retrovirally transduced to express c-Kit receptors, phenylalanine substitution of c-Kit tyrosine residue 569 was shown to be associated with disruption of c-Kit-SHP-1 binding and induction of hyperproliferative responses to stem cell factor. Although phenylalanine substitution of c-Kit tyrosine residue 567 in the Ba/F3-c-Kit cells did not alter SHP-1 binding to c-Kit, the capacity of a second c-Kit-binding tyrosine phosphatase, SHP-2, to associate with c-Kit was markedly reduced, and the cells again showed hyperproliferative responses to stem cell factor. These data therefore identify SHP-1 binding to tyrosine 569 on c-Kit as an interaction pivotal to SHP-1 inhibitory effects on c-Kit signaling, but they indicate as well that cytosolic protein tyrosine phosphatases other than SHP-1 may also negatively regulate the coupling of c-Kit engagement to proliferation.