Extensive evidence has been accumulated to implicate the intracellular protein tyrosine phosphatase, Src homology region 2 domain-containing protein tyrosine phosphatase-1 (SHP-1), as a negative regulator of TCR-signaling thresholds. Specifically, T cells from the SHP-1-deficient mouse, motheaten, exhibit a hyperproliferative phenotype when activated by cognate peptide-pulsed APCs. However, the cellular basis for this phenotype has not been fully explained. Using the intracellular fluorescent dye, CFSE, we show that a greater proportion of motheaten vs control naive CD8(+) T cells undergo cell division when activated by peptide-pulsed APCs. Furthermore, there is a greater likelihood of TCRs on SHP-1-deficient vs control T cells binding to peptide/MHC ligands on APCs when using TCR down-regulation as an indirect measure of TCR engagement. In addition, T cell-APC conjugate assays provide direct evidence that a greater proportion of SHP-1-deficient T cells are capable of forming stable conjugates with APCs and this may explain, at least in part, their hyperproliferative response to TCR-triggered stimulation. The physiological relevance of the combined in vitro observations is demonstrated by the significantly enhanced in vivo expansion and CTL capacity generated in mice receiving adoptively transferred SHP-1-deficient naive CD8(+) T cells when compared with control T cells.