PTP-BL is a cytosolic multidomain protein tyrosine phosphatase that shares homologies with several submembranous and tumor suppressor proteins. Here we show, by transient expression of modular protein domains of PTP-BL in epithelial MDCK cells, that the presence of a FERM domain in the protein is both necessary and sufficient for its targeting to the apical side of epithelial cells. Furthermore, immuno-electron microscopy on stable expressing MDCK pools, that were obtained using an EGFP-based cell sorting protocol, revealed that FERM domain containing fusion proteins are enriched in microvilli and have a typical submembranous location at about 10-15 nm from the plasma membrane. Immunofluorescence microscopy suggested colocalization of the FERM domain moiety with the membrane-cytoskeleton linker ezrin. However, at the electron microscopy level this colocalization cannot be confirmed nor can we detect a direct interaction by immunoprecipitation assays. Fluorescence recovery after photobleaching (FRAP) experiments show that PTP-BL confinement is based on a dynamic steady state and that complete redistribution of the protein may occur within 20 minutes. Our observations suggest that relocation is mediated via a cytosolic pool, rather than by lateral movement. Finally, we show that PTP-BL phosphatase domains are involved in homotypic interactions, as demonstrated by yeast two-hybrid assays. Both the highly restricted subcellular compartmentalization and its specific associative properties may provide the appropriate conditions for regulating substrate specificity and catalytic activity of this member of the PTP family.