Cellular prostatic acid phosphatase (cPAcP), an authentic tyrosine phosphatase, is proposed to function as a negative growth regulator of prostate cancer (PCa) cells in part through its dephosphorylation of ErbB-2. Nevertheless, the direct interaction between cPAcP and ErbB-2 has not been shown nor the specific dephosphorylation site of ErbB-2 by cPAcP. In this report, our data show that the phosphorylation level of ErbB-2 primarily at Tyr(1221/2) correlates with the growth rate of both LNCaP and MDA PCa2b human PCa cells. Further, cPAcP reciprocally co-immunoprecipitated with ErbB-2 in a non-permissive growth condition. Expression of wild type cPAcP, but not inactive mutant, by cDNA in cPAcP-null LNCaP C-81 cells results in decreased tyrosine phosphorylation of ErbB-2 including Tyr(1221/2). Concurrently, Tyr(317) phosphorylation of p52(Shc), proliferating cell nuclear antigen expression, and cell growth are decreased in these cells. Conversely, decreased cPAcP expression by short hairpin RNA in LNCaP C-33 cells was associated with elevated phosphorylation of ErbB-2 initially at Tyr(1221/2). Its downstream p52(Shc), ERK1/2, Akt, Src, STAT-3, and STAT-5 were activated, and cell proliferation, proliferating cell nuclear antigen, and cyclin D1 expression were increased. Stable subclones of C-33 cells by small interfering PAcP had elevated Tyr(1221/2) phosphorylation of ErbB-2 and exhibited androgen-independent growth and increased tumorigenicity in xenograft female animals. In summary, our data together indicate that in prostate epithelia, cPAcP interacts with and dephosphorylates ErbB-2 primarily at Tyr(1221/2) and hence blocks downstream signaling, leading to reduced cell growth. In PCa cells, decreased cPAcP expression is associated with androgen-independent cell proliferation and tumorigenicity as seen in advanced hormone-refractory prostate carcinomas.