Protein tyrosine phosphatase (PTP) 1B has been implicated as a negative regulator of multiple signaling pathways downstream of receptor tyrosine kinases. Inhibition of this enzyme was initially thought to potentially lead to increased oncogenic signaling and tumorigenesis. Surprisingly, we show that platelet-derived growth factor-stimulated extracellular-regulated kinase signaling in PTP1B-deficient cells is not significantly hyperactivated. Moreover, these cells exhibit decreased Ras activity and reduced proliferation by way of previously uncharacterized pathways. On immortalization, PTP1B-deficient fibroblasts display increased expression of Ras GTPase-activating protein (p120RasGAP). Furthermore, we demonstrate that p62Dok (downstream of tyrosine kinase) is a putative substrate of PTP1B and that tyrosine phosphorylation of p62Dok is indeed increased in PTP1B-deficient cells. Consistent with the decreased Ras activity in cells lacking PTP1B, introduction of constitutively activated Ras restored extracellular-regulated kinase signaling and their proliferative potential to those of WT cells. These results indicate that loss of PTP1B can lead to decreased Ras signaling, despite enhanced signaling of other pathways. This finding may in part explain the absence of increased tumor incidence in PTP1B-deficient mice. Thus, PTP1B can positively regulate Ras activity by acting on pathways distal to those of receptor tyrosine kinases.