SHP-2, a ubiquitously expressed Src hmology 2 (SH2) domain-containing tyrosine phosphatase, plays a critical role in the regulation of growth factor and cytokine signal transduction. Here we report a novel function of this phosphatase in DNA damage-induced cellular responses. Mutant embryonic fibroblast cells lacking functional SHP-2 showed significantly decreased apoptosis in response to DNA damage. Following cisplatin treatment, induction of p73 and its downstream effector p21(Cip1) was essentially blocked in SHP-2 mutant cells. Further investigation revealed that activation of the nuclear tyrosine kinase c-Abl, an essential mediator in DNA damage induction of p73, was impaired in the mutant cells, suggesting a functional requirement of SHP-2 in c-Abl activation. Consistent with this observation, the effect of overexpression of c-Abl kinase in SHP-2 mutant cells on sensitizing the cells to DNA damage-induced death was abolished. Additionally, we found that in embryonic fibroblast cells 30-40% of SHP-2 was localized in the nuclei, and that a fraction of nuclear SHP-2 was constitutively associated with c-Abl via its SH3 domain. Phosphatase activity of nuclear but not cytoplasmic SHP-2 was significantly enhanced in response to DNA damage. These results together suggest a novel nuclear function for SHP-2 phosphatase in the regulation of DNA damage-induced apoptotic responses.