Overproduction of nitric oxide (NO) can cause neuronal damage, contributing to the pathogenesis of several neurodegenerative diseases and stroke (i.e., focal cerebral ischemia). NO can mediate neurotoxic effects at least in part via protein S-nitrosylation, a reaction that covalently attaches NO to a cysteine thiol (or thiolate anion) to form an S-nitrosothiol. Recently, the tyrosine phosphatase Src homology region 2-containing protein tyrosine phosphatase-2 (SHP-2) and its downstream pathways have emerged as important mediators of cell survival. Here we report that in neurons and brain tissue NO can S-nitrosylate SHP-2 at its active site cysteine, forming S-nitrosylated SHP-2 (SNO-SHP-2). We found that NMDA exposure in vitro and transient focal cerebral ischemia in vivo resulted in increased levels of SNO-SHP-2. S-Nitrosylation of SHP-2 inhibited its phosphatase activity, blocking downstream activation of the neuroprotective physiological ERK1/2 pathway, thus increasing susceptibility to NMDA receptor-mediated excitotoxicity. These findings suggest that formation of SNO-SHP-2 represents a key chemical reaction contributing to excitotoxic damage in stroke and potentially other neurological disorders.