Src homology 2 domain-containing protein tyrosine phosphatase (SHP) substrate-1 (SHPS-1) is a transmembrane protein that binds the protein tyrosine phosphatases SHP-1 and SHP-2 through its cytoplasmic region and is expressed on the surface of CD11c(+) dendritic cells (DCs) and macrophages. In this study, we show that mice that express a mutant form of SHPS-1 lacking most of the cytoplasmic region are resistant to experimental autoimmune encephalomyelitis (EAE) in response to immunization with a peptide derived from myelin oligodendrocyte glycoprotein (MOG (35-55)). The MOG (35-55)-induced proliferation of, and production of IFN-gamma, IL-2, and IL-17, by T cells from immunized SHPS-1 mutant mice were reduced compared with those apparent for wild-type cells. The abilities of splenic DCs from mutant mice to stimulate an allogenic MLR and to prime Ag-specific T cells were reduced. Both IL-12-stimulated and TLR-dependent cytokine production by DCs of mutant mice were also impaired. Finally, SHPS-1 mutant mice were resistant to induction of EAE by adoptive transfer of MOG (35-55)-specific T cells. These results show that SHPS-1 on DCs is essential for priming of naive T cells and the development of EAE. SHPS-1 is thus a potential therapeutic target in inflammatory disorders of the CNS and other autoimmune diseases.