Mice null for the T-cell protein tyrosine phosphatase (Tcptp-/-) die shortly after birth due to complications arising from the development of a systemic inflammatory disease. It was originally reported that Tcptp-/- mice have increased numbers of macrophages in the spleen; however, the mechanism underlying the aberrant growth and differentiation of macrophages in Tcptp-/- mice is not known. We have identified Tcptp as an important regulator of colony-stimulating factor 1 (CSF-1) signaling and mononuclear phagocyte development. The number of CSF-1-dependent CFU is increased in Tcptp-/- bone marrow. Tcptp-/- mice also have increased numbers of granulocyte-macrophage precursors (GMP), and these Tcptp-/- GMP yield more macrophage colonies in response to CSF-1 relative to wild-type cells. Furthermore, we have identified the CSF-1 receptor (CSF-1R) as a physiological target of Tcptp through substrate-trapping experiments and its hyperphosphorylation in Tcptp-/- macrophages. Tcptp-/- macrophages also have increased tyrosine phosphorylation and recruitment of a Grb2/Gab2/Shp2 complex to the CSF-1R and enhanced activation of Erk after CSF-1 stimulation, which are important molecular events in CSF-1-induced differentiation. These data implicate Tcptp as a critical regulator of CSF-1 signaling and mononuclear phagocyte development in hematopoiesis.