Interleukin-1 (IL-1) induces extracellular matrix degradation as a result of increased expression of matrix metalloproteinases (MMPs).Reversible phosphorylation of proteins on tyrosine residues is a pivotal, post-translational modification in many signal transduction pathways. The extent of these modifications is determined by the balance between the activities of proteintyrosine kinases and phosphatases (1, 2). Whereas proteintyrosine kinases are thought to regulate the amplitude of responses to extracellular signals, protein-tyrosine phosphatases (PTPs) 2 may determine the rate and duration of these responses (3). For IL-1 signaling in adherent cells, tyrosine phosphorylation of focal adhesion proteins such as the focal adhesion kinase is a critical, rate-limiting process (4). Tyrosine phosphorylated proteins, such as focal adhesion kinase, paxillin, and Src family kinases, which are enriched in focal adhesions (5), influence the assembly, maturation, and disassembly of these adhesive structures (6 -9) and also impact signaling through focal adhesions (10). The dynamic and reversible nature of tyrosine phosphorylation of focal adhesion proteins suggests an important role for protein-tyrosine kinases and PTPs in focal adhesion-dependent signaling (11). There are numerous PTPs in focal adhesions, and, in particular, SHP-2 is recruited to focal adhesions upon integrin engagement (12-14). In the absence of SHP-2, the number of focal adhesions and actin stress fibers increases, which is associated with diminished spreading and motility (15, 16). Expression of a dominant-negative SHP-2 enhances the formation of focal adhesions and stress fibers (17). The dynamics of focal adhesion assembly and IL-1-induced signaling pathways, including Ca 2ϩ release and ERK phosphorylation, are dependent on phosphorylation of Tyr 542 of 18,19), which can in turn affect the phosphatase activity of SHP-2 (20).We recently reported that another PTP, namely PTP␣, plays a prominent role in the regulation of focal adhesions during cell adhesion, spreading, and motility (21). PTP␣ is a receptor-like PTP that can activate Src family kinases (e.g. Src and Fyn) via dephosphorylation of an inhibitory C-terminal tyrosine residue (22)(23)(24)(25)(26)(27). We have also shown that through its interactions with Src, PTP␣ controls IL-1 induced phosphorylation of the inositol 1,4,5-phosphate receptor and consequently, Ca 2ϩ release (28). Further, PTP␣ regulates formation of focal adhesions in response to mechanical force, strengthens connections between integrins and the cytoskeleton, and modulates cytoskeletal reorganization in response to integrin ligation (26,27). In the absence of PTP␣, fibroblasts demonstrated reduced spreading, increased numbers of abnormal focal adhesions, decreased tyrosine phosphorylation of focal * This work was supported by grants from the Canadian Institutes of Health Research (MOP 84254; to C. A. M. and G. P. D.). This work was also supported in part by National Institutes of Health Grant HL090669 (to G. P. D.) and funds ...