Signal pathways that reduce the levels of tyrosine-phosphorylated STAT3 (pSTAT3) allow late retinal progenitors to exit the cell cycle and enter a terminal differentiation pathway into rod photoreceptors. In the mouse retina, we previously identified PKC-β1 and PKC-γ isoforms as essential components of a key signal pathway and IGF-1 as a major extrinsic factor regulating rod formation. In this manuscript, we demonstrate that PKC decreases phosphotyrosine but not phosphoserine on STAT3 in neonatal mouse retinas. Neither IGF-1 nor PMA induced a significant change in the levels of STAT3 or in the levels of the key proteins regulating STAT3 degradation, SOCS3, and PIAS3. Treatment of neonatal mouse retinal explants with sodium orthovanadate inhibited the PKC-mediated reduction in pSTAT3, indicating a role for a phosphatase. Addition of the PTEN inhibitor bpV(phen) to explant cultures treated with IGF-1 or PMA had no effect on the reduction in pSTAT3 levels, but the effect of both IGF-1 and PMA was blocked by a concentration of the inhibitor NSC87877 that is selective for the phosphatases Shp1 and Shp2. Inhibition of Shp1/2 phosphatases was also sufficient to abolish the IGF1-mediated induction of rod photoreceptor differentiation in the retina explant cultures. We conclude that one or both of these phosphatases are key components regulating the formation of rod photoreceptors in mouse retina.