Human NK cells use class I MHC-binding inhibitory receptors, such as the killer cell Ig-like receptor (KIR) family, to discriminate between normal and abnormal cells. Some tumors and virus-infected cells down-regulate class I MHC and thereby become targets of NK cells. Substantial evidence indicates that the mechanism of KIR-mediated inhibition involves recruitment of the protein tyrosine phosphatases, Src homology 2-containing protein tyrosine phosphatase-1 (SHP-1) and SHP-2, to two phosphorylated cytoplasmic immunoreceptor tyrosine-based inhibitory motifs (ITIMs). KIR2DL5 is a type II member of the KIR2D family with an atypical extracellular domain and an intracytoplasmic domain containing one typical ITIM and one atypical ITIM sequence. Although KIR2DL5 structure is expressed by approximately 50% of humans and is conserved among primate species, its function has not been determined. In the present study, we directly compared functional and biochemical properties of KIR2DL5, KIR3DL1 (a type I KIR with two ITIMs), and KIR2DL4 (the only other type II KIR, which has a single ITIM) in a human NK-like cell line. Our results show that KIR2DL5 is an inhibitory receptor that can recruit both SHP-1 and SHP-2, and its inhibitory capacity is more similar to that of the cytoplasmic domain of KIR2DL4 than KIR3DL1. Interestingly, inhibition of NK cell cytotoxicity by KIR2DL5 was blocked by dominant-negative SHP-2, but not dominant-negative SHP-1, whereas both dominant-negative phosphatases can block inhibition by KIR3DL1. Therefore, the cytoplasmic domains of type II KIRs (2DL4 and 2DL5) exhibit distinct inhibitory capacities when compared with type I KIRs (3DL1), due to alterations in the canonical ITIM sequences.