A cDNA encoding a nontransmembrane protein-tyrosine phosphatase (PTP; EC 3.1.3.48), termed PTP2C, was isolated from a human umbilical cord cDNA library. The enzyme contains a single phosphatase domain and two adjacent copies of the src homology 2 (SH2) domain at its amino terminus. A variant of PTP2C (PTP2Ci) which has four extra amino acid residues within the catalytic domain has been identified also. PTP2C is widely expressed in human tissues and is particularly abundant in heart, brain, and skeletal muscle. The catalytic domain of PTP2C was expressed as a recombinant enzyme in Escherichia coli and purified to near homogeneity by two chromatographic steps. The recombinant enzyme was totally specific toward phosphotyrosine residues. The structural similarity between PTP2C and the previously described PTP1C suggests the existence of a subfamily of SH2-containing PTPs; these may play an important role in signal transduction through interaction of their SH2 domains with phosphotyrosine-containing proteins.