We have used a number of in vitro and in vivo techniques to identify the molecules that can bind to the cytoplasmic tail of the Ly49A receptor. Affinity chromatography using peptides corresponding to the N-terminal 18 amino acids of Ly49A allowed the recovery of a number of proteins that bound preferentially to the tyrosine-phosphorylated peptide, including SH2-containing phosphatase-1 (SHP1) and the SH2-containing inositol 5' phosphatase (SHIP). In another approach, using the entire cytoplasmic domain of the Ly49A receptor, we found that SHP2 also interacted with the tyrosine-phosphorylated form of the Ly49A cytoplasmic tail. Using BIACORE(R)2000 analysis, we determined that both SHP1 and SHP2 bound to the tyrosine-phosphorylated cytoplasmic tail of Ly49A with affinities in the nanomolar range, whilst SHIP showed no binding. Mutation of tyrosine-36 to phenylalanine did not significantly affect the affinities of these proteins for the tyrosine-phosphorylated cytoplasmic tail of Ly49A. In addition, using a whole-cell system with T-cell lymphoma cell lines that expressed the Ly49A receptor or its H-2Dd ligand, we determined that engagement of Ly49A by its major histocompatibility complex (MHC) ligand leads to tyrosine-phosphorylation events and recruitment of SHP1. Recruitment of SHP1 was rapid and transient, reaching a maximum after 5 min. These data suggest that mechanisms for the inhibitory signal are generated following receptor engagement. They also provide direct evidence that ligand engagement of the Ly49A receptor is responsible for recruitment of downstream signalling molecules.