Epidermal growth factor receptor (EGFR) mutants drive lung tumorigenesis and are targeted for therapy. However, resistance to EGFR inhibitors has been observed, in which the mutant EGFR remains active. Thus, it is important to uncover mediators of EGFR mutant-driven lung tumors to develop new treatment strategies. The protein tyrosine phosphatase (PTP) Shp2 mediates EGF signaling. Nevertheless, it is unclear if Shp2 is activated by oncogenic EGFR mutants in lung carcinoma or if inhibiting the Shp2 PTP activity can suppress EGFR mutant-induced lung adenocarcinoma. Here, we generated transgenic mice containing a doxycycline (Dox)-inducible PTP-defective Shp2 mutant (tetO-Shp2CSDA). Using the rat Clara cell secretory protein (CCSP)-rtTA-directed transgene expression in the type II lung pneumocytes of transgenic mice, we found that the Gab1-Shp2 pathway was activated by EGFRL858R in the lungs of transgenic mice. Consistently, the Gab1-Shp2 pathway was activated in human lung adenocarcinoma cells containing mutant EGFR. Importantly, Shp2CSDA inhibited EGFRL858R-induced lung adenocarcinoma in transgenic animals. Analysis of lung tissues showed that Shp2CSDA suppressed Gab1 tyrosine phosphorylation and Gab1-Shp2 association, suggesting that Shp2 modulates a positive feedback loop to regulate its own activity. These results show that inhibition of the Shp2 PTP activity impairs mutant EGFR signaling and suppresses EGFRL858R-driven lung adenocarcinoma.