Protein tyrosine phosphatase (PTP) is a receptor type protein tyrosine phosphatase that uses pleiotrophin as a ligand. Pleiotrophin inactivates the phosphatase activity of PTP, resulting in the increase of tyrosine phosphorylation levels of its substrates. We studied the functional interaction between PTP and DNER, a Notch-related transmembrane protein highly expressed in cerebellar Purkinje cells. PTP and DNER displayed patchy colocalization in the dendrites of Purkinje cells, and immunoprecipitation experiments indicated that these proteins formed complexes. Several tyrosine residues in and adjacent to the tyrosine-based and the second C-terminal sorting motifs of DNER were phosphorylated and were dephosphorylated by PTP, and phosphorylation of these tyrosine residues resulted in the accumulation of DNER on the plasma membrane. DNER mutants lacking sorting motifs accumulated on the plasma membrane of Purkinje cells and Neuro-2A cells and induced their process extension. While normal DNER was actively endocytosed and inhibited the retinoic-acid-induced neurite outgrowth of Neuro-2A cells, pleiotrophin stimulation increased the tyrosine phosphorylation level of DNER and suppressed the endocytosis of this protein, which led to the reversal of this inhibition, thus allowing neurite extension. These observations suggest that pleiotrophin-PTP signaling controls subcellular localization of DNER and thereby regulates neuritogenesis.Protein tyrosine phosphatase (PTP), also known as RPTP/, is a receptor type protein tyrosine phosphatase that is synthesized as a chondroitin sulfate proteoglycan (12,16,17,21,28,32). There are three major splice variants of this molecule, the full-length form (PTP-A), the short receptor form (PTP-B), and the secreted form (phosphacan) (Fig.