Protein tyrosine phosphatases (PTPs) are key mediators that link physiological cues with reversible changes in protein structure and function; nevertheless, significant details concerning their regulation in vivo remain unknown. We demonstrate that PTP associates with microtubules in vivo and is inhibited by them in a noncompetitive manner. Microtubule-associated proteins, which interact strongly with microtubules in vivo, significantly increase binding of PTP to tubulin in vitro and further reduce phosphatase activity. Conversely, disruption of microtubule structures in cells reduces their association with PTP, alters the subcellular localization of the phosphatase, and increases its specific activity. Activation of the epidermal growth factor receptor (EGFR) increases the PTP-microtubule association in a manner dependent upon EGFR-induced phosphorylation of PTP at Y638 and upon microtubule integrity. These events are transient and occur with rapid kinetics similar to EGFR autophosphorylation, suggesting that activation of the EGFR transiently down-regulates PTP activity near the receptor by promoting the PTP-microtubule association. Tubulin also inhibits the tyrosine phosphatase PTP1B but not receptor-type PTP or the unrelated alkaline phosphatase. The data suggest that reversible association with microtubules is a novel, physiologically regulated mechanism for regulation of tyrosine phosphatase activity in cells.Reversible phosphorylation of tyrosine residues in proteins is a major regulator of protein structure and function. Tyrosine phosphorylation of proteins is regulated in part by the activity of members of the protein tyrosine phosphatase (PTP) superfamily, which currently includes over 100 genes in higher organisms. Of these, 38 genes encode "classical" tyrosine phosphatases (PTPs), which are strictly specific for phosphotyrosine. Products of this gene family all contain one or two copies of the PTP domain and are either receptor-type integral membrane proteins or non-receptor-type proteins (1, 3).The numbers of known tyrosine kinases and tyrosine phosphatases are similar and small compared to the numbers and complexities of their potential substrates (1). The apparent contradiction between this and the high degree of specificity that exists in signaling processes in vivo has made understanding the mechanisms by which PTP activity is regulated of paramount importance. PTP genes often produce several distinct protein products by alternative splicing or use of alternative promoters (3). At the protein level, PTP activity can be inhibited by dimerization (e.g., see references 22, 23, and 43) or by reversible oxidation of the key cysteine residue in the PTP catalytic domain (9, 44). Proteolysis and phosphorylation, which can affect subcellular localization, conformation, or the ability to bind other proteins can also activate or inhibit PTPs (e.g., see references 6, 13, 17, 48, and 49). Regulation of PTP activity by binding of extracellular ligands to receptor-type PTPs (RPTPs), which inhibits PTP activity...