Viruses in the family Polydnaviridae are symbiotically associated with parasitoid wasps. Wasps inject polydnaviruses (PDVs) when laying an egg into their insect host, and expression of viral gene products causes several physiological alterations, including immunosuppression, that allow the wasp's progeny to develop. As with other PDVs, most Microplitis demolitor bracovirus (MdBV) genes are related variants that form gene families. The largest MdBV gene family includes 13 members that encode predicted proteins related to protein tyrosine phosphatases (PTPs). Sequence analysis during the present study indicated that five PTP family members (PTP-H2, -H3, -N1, and -N2) have fully conserved catalytic domains, whereas other family members exhibited replacements, deletions, or rearrangements of amino acids considered essential for tyrosine phosphatase activity. Expression studies indicated that most MdBV PTP genes are expressed in virus-infected host insects, with transcript abundance usually being highest in hemocytes. MdBV-infected hemocytes also exhibited higher levels of tyrosine phosphatase activity than noninfected hemocytes. We produced expression constructs for four of the most abundantly expressed PTP family members and conducted functional studies with hemocyte-like Drosophila S2 cells. These experiments suggested that recombinant PTP-H2 and PTP-H3 are functional tyrosine phosphatases whereas PTP-H1 and PTP-J1 are not. PTP-H2 and -H3 localized to focal adhesions in S2 cells, and coexpression with another MdBV gene product, Glc1.8, resulted in complete inhibition of phagocytosis.