Protein-tyrosine-phosphatases (PTPases) have been implicated in the regulation of certain tyrosine kinase growth factor receptors in that they dephosphorylate the activated (autophosphorylated) form of the receptors. In order to identify PTPases that potentially act on receptor targets in liver, we used the human leucocyte common antigen-related PTPase (LAR) cDNA [Streuli, Krueger, Hall, Schlossman and Saito (1988) J. Exp. Med. 168, 1523-1530] and isolated two closely related transmembrane PTPase homologues from a rat hepatic cDNA library. Both PTPases had large extracellular domains that contained three immunoglobulin-like repeats and eight type-III fibronectin repeats. Both enzymes had tandem homologous PTPase domains following a single hydrophobic transmembrane domain. One sequence encoded the rat homologue of LAR. The second PTPase, designated LAR-PTP2, had 79 and 90% identity with rat LAR in the respective cytoplasmic PTPase domains, with only 57% sequence similarity in the extracellular domain. The catalytic domains of LAR and LAR-PTP2 prepared by bacterial expression were active in dephosphorylating a variety of phosphotyrosyl substrates but did not hydrolyse phosphoserine or phosphothreonine residues of labelled casein. Both enzymes exhibited rapid turnover numbers of 4-7 s-1 for myelin basic protein and 78-150 s-1 for derivatized lysozyme. LAR and LAR-PTP2 displayed similar PTPase activity towards the simultaneous dephosphorylation of receptors of intact insulin and epidermal growth factor from liver membranes. These data indicate that there is a family of LAR-related PTPases that may regulate the phosphorylation state of receptor tyrosine kinases in liver and other tissues.