Sprouty (Spry) proteins are negative regulators of receptor tyrosine kinase signaling; however, their exact mechanism of action remains incompletely understood. We identified phosphatidylinositol-specific phospholipase C (PLC)-γ as a partner of the Spry1 and Spry2 proteins. Spry-PLCγ interaction was dependent on the Src homology 2 domain of PLCγ and a conserved N-terminal tyrosine residue in Spry1 and Spry2. Overexpression of Spry1 and Spry2 was associated with decreased PLCγ phosphorylation and decreased PLCγ activity as measured by production of inositol (1,4,5)-triphosphate (IP(3)) and diacylglycerol, whereas cells deficient for Spry1 or Spry1, -2, and -4 showed increased production of IP(3) at baseline and further increased in response to growth factor signals. Overexpression of Spry 1 or Spry2 or small-interfering RNA-mediated knockdown of PLCγ1 or PLCγ2 abrogated the activity of a calcium-dependent reporter gene, suggesting that Spry inhibited calcium-mediated signaling downstream of PLCγ. Furthermore, Spry overexpression in T-cells, which are highly dependent on PLCγ activity and calcium signaling, blocked T-cell receptor-mediated calcium release. Accordingly, cultured T-cells from Spry1 gene knockout mice showed increased proliferation in response to T-cell receptor stimulation. These data highlight an important action of Spry, which may allow these proteins to influence signaling through multiple receptors.