The T-cell protein tyrosine phosphatase (TCPTP/PTPN2) targets a broad variety of substrates across different subcellular compartments. In spite of that, the structural basis for the regulation of TCPTP's activity remains elusive. Here, we investigated whether the activity of TCPTP is regulated by a potential allosteric site in a comparable manner to its most similar PTP family member (PTP1B/PTPN1). We determined two crystal structures of TCPTP at 1.7 and 1.9 Å resolutions that include helix α7 at the TCPTP C-terminus. Helix α7 has been functionally characterized in PTP1B and was identified as its allosteric switch. However, its function is unknown in TCPTP. Here, we demonstrate that truncation or deletion of helix α7 reduced the catalytic efficiency of TCPTP by ∼4-fold. Collectively, our data supports an allosteric role of helix α7 in regulation of TCPTP's activity, similar to its function in PTP1B, and highlights that the coordination of helix α7 with the core catalytic domain is essential for the efficient catalytic function of TCPTP.