Two protein forms of tyrosine phosphatase epsilon (PTPe) are known ± receptor-like (tm-PTPe) and non receptor-like (cyt-PTPe), with each form possessing unique tissue-speci®c expression patterns, subcellular localization, and physiological functions. We describe two additional forms of PTPe protein ± p67 and p65. p67 is produced by initiation of translation at an internal initiation codon of PTPe mRNA molecules, while p65 is produced by speci®c proteolytic cleavage of larger PTPe proteins. Cleavage is inhibited by MG132, but is proteasome-independent. In contrast with full-length tm-PTPe and cyt-PTPe, p67 and p65 are exclusively cytoplasmic, are not phosphorylated by Neu, and do not associate with Grb2 in unstimulated cells. p67 and p65 are catalytically active and can reduce Src-mediated phosphorylation of the Kv2.1 voltage-gated potassium channel, albeit with reduced eciency which most likely results from their cytoplasmic localization. We also show that full-length cyt-PTPe protein can be found at the cell membrane and in the nucleus and that it is the ®rst 27 residues of cyt-PTPe which determine this localization. p67 and p65 provide mechanisms for removing PTPe activity from the cell membrane, possibly serving to down-regulate PTPe activity there. PTPe emerges as a family of four related proteins whose expression, subcellular localization and most likely physiological roles are subject to complex regulation at the transcriptional, translational and post-translational levels.