Differentiation in African trypanosomes (Trypanosoma brucei) entails passage between a mammalian host, where parasites exist as a proliferative slender form or a G0-arrested stumpy form, and the tsetse fly. Stumpy forms arise at the peak of each parasitaemia and are committed to differentiation to procyclic forms that inhabit the tsetse midgut. We have identified a protein tyrosine phosphatase (TbPTP1) that inhibits trypanosome differentiation. Consistent with a tyrosine phosphatase, recombinant TbPTP1 exhibits the anticipated substrate and inhibitor profile, and its activity is impaired by reversible oxidation. TbPTP1 inactivation in monomorphic bloodstream trypanosomes by RNA interference or pharmacological inhibition triggers spontaneous differentiation to procyclic forms in a subset of committed cells. Consistent with this observation, homogeneous populations of stumpy forms synchronously differentiate to procyclic forms when tyrosine phosphatase activity is inhibited. Our data invoke a new model for trypanosome development in which differentiation to procyclic forms is prevented in the bloodstream by tyrosine dephosphorylation. It may be possible to use PTP1B inhibitors to block trypanosomatid transmission.