PTP2C (also known as Syp/SH-PTP2/PTP1D) is a soluble protein tyrosine phosphatase present in most cell types. It interacts directly with activated PDGF receptor via its SH2 domains, which results in its phosphorylation on tyrosine residue(s). The phosphorylated PTP2C in turn binds to the SH2 domain of GRB2, serving as an adaptor in the transduction of mitogenic signals from the growth factor receptor to the Ras and MAP kinase signaling pathways. We investigated the interaction of PTP2C with the PDGF receptor by examining the localization of both proteins after PDGF stimulation of 293 cells which stably express the human PDGF receptor. In resting cells, transiently expressed PTP2C was distributed throughout the cytoplasm. Upon stimulation with PDGF, PTP2C was translocated from the cytoplasm to membrane ruffles. Immunofluorescence examination revealed that PTP2C colocalized with actin, the PDGF receptors, and hyper-tyrosine-phosphorylated protein(s). Neither deletion of the SH2 domains nor point mutations at either the catalytic site or the major phosphorylation site affected membrane ruffling or the localization of PTP2C to the ruffles of PDGF-stimulated cells. However, the expression of a catalytically inactive mutant PTP2C substantially prolonged ruffling activity following PDGF stimulation. These results suggest that PTP2C is involved in the down-regulation of the membrane ruffling pathway, and in contrast to its positive function in the MAP kinase pathway, the phosphatase activity negatively regulates ruffling activity.