The phosphotyrosyl phosphatase (PTPase) specificity of phosphotyrosyl-phosphatase-activator-(PTPA)-stimulated protein phosphatase (PP)2A(D) (rabbit muscle) and a bona fide PTP-1B (Xenopus laevis oocytes) were examined in vitro using phosphotyrosine-containing peptides, derived from the phosphorylation sites of p34cdc2, p50/HS1 protein, Abl, c-Src and c-Fgr, as well as the intact phosphoprotein p50/HS1 and the Src-related tyrosine kinases, Lyn and c-Fgr. The local specificity determinants were found to be different for both PTPases. The length of the phosphopeptides is more important for PP2A(D) than for PTP-1B, C-terminal acidic residues adjacent to the phosphotyrosine are detrimental for the PTPase activity of PP2A(D), but they do not affect the PTP-1B activity. Acidic residues at the --2 and --3 position relative to Tyr(P) primarily dictate dephosphorylation by PTP-1B. The higher-order structure of the protein substrates also differentially influences both enzymes: the phospho-octapeptide KDDEYpNPA, which reproduces the autophosphorylation site in c-Fgr (Tyr400), is only dephosphorylated by PP2A(D) if embedded in the intact protein, whereas the opposite is true for PTP-1B. Both the intact p50/HS1 phosphoprotein and the derived phosphopeptide are substrates only for PTP-1B and not for PP2A(D). Lyn and c-Fgr phosphorylated by C-terminal Src kinase (CSK) at their down-regulatory site are resistant to the action of both PTPases while the [Phe6]Src-(514-533) phosphopeptide, representing the highly similar site affected by CSK in c-Src, is readily dephosphorylated by both PTPases, although to a different extent. In vitro dephosphorylation of the c-Fgr Tyr400 site by PP2A(D) is correlated with a decreased tyrosine kinase activity towards exogenous substrates. Under experimental conditions in which both Tyr400 (autophosphorylation site) and Tyr511 (down-regulatory site) of c-Fgr are phosphorylated, PP2A(D) can reverse both phosphorylations.