Inositol phosphatases play an important role in regulation of cellular levels of lipid second messengers. Recently we have reported a novel function for SHIP2 in cell adhesion and spreading. In this study, we further characterize the adhesion-dependent tyrosine phosphorylation of SHIP2 and examine the role of Src family tyrosine kinases in the regulation of SHIP2 function. SHIP2 was tyrosine phosphorylated during cell attachment and spreading on collagen I, but not on fibronectin, collagen IV, laminin or poly-L-lysine. SHIP2 tyrosine phosphorylation, induced by plating on a collagen-I-coated surface but not by epidermal growth factor or insulin treatment of cells, was completely blocked by small molecule inhibitors of Src family kinases. SHIP2 could be phosphorylated in vitro by recombinant Src kinase and tyrosines 986-987 in the NPXY motif of SHIP2 appear to be the major sites of phosphorylation for Src both in vitro and in vivo. An activated form of Src induced strong tyrosine phosphorylation of SHIP2 while a dominant-negative form decreased collagen-I-dependent SHIP2 phosphorylation. SHIP2 associated with the adapter protein Shc via its NPXY motif during cell spreading on collagen I in a Src activity-dependent manner. Expression of SHIP2 with mutated NPXY motif caused deregulation of lamellipodia formation during spreading on collagen I. These observations indicate that SHIP2 is regulated by Src family kinases during cell attachment and spreading on collagen I and suggest an important role for SHIP2 as a part of a signaling pathway that regulates actin cytoskeleton remodeling.