The transmembrane PTPase HPTPP differs from its related family members in having a single rather than a tandemly duplicated cytosolic catalytic domain. We have expressed the 354-amino acid, 41-kDa human PTPP catalytic fragment in Escherichia coli, purified it, and assessed catalytic specificity with a series of pY peptides. HPTPP shows distinctions from the related LAR PTPase and T cell CD45 PTPase domains: it recognizes phosphotyrosyl peptides of 9-1 1 residues from lck, src, and PLCy with K , values of 2, 4, and 1 pM, some 40-200-fold lower than the other two PTPases. With kc,, values of 30-205 s-' , the catalytic efficiency, kcut/Km, of the HPTPP 41-kDa catalytic domain is very high, up to 5.7 X lo7 M-' s-' . The peptides corresponding to and EGFR (1,167-1,177) phosphorylation sites were used for structural variation to assess pY sequence context recognition by HPTPP catalytic domain. While exchange of the alanine residue at the +2 position of the PLCy ( K , of 1 pM) peptide to lysine or aspartic acid showed little or no effect on substrate affinity, replacement by arginine increased the K , 35-fold. Similarly, the high K , value of the EGFR pY peptide (K, of 104 p M ) derives largely from the arginine residue at the +2 position of the peptide, since arginine to alanine single mutation at the -2 position of the EGFR peptide decreased the K , value 34-fold to 3 pM. Three thiophosphotyrosyl peptides have been prepared and act as substrates and competitive inhibitors of these PTPase catalytic domains.