The protein-tyrosine phosphatase Shp2 is required for normal activation of the ERK mitogen-activated protein kinase in multiple receptor tyrosine kinase signaling pathways. In fibroblasts, Shp2 undergoes phosphorylation at two C-terminal tyrosyl residues in response to some (fibroblast growth factor and platelet-derived growth factor (PDGF)) but not all (epidermal growth factor and insulin-like growth factor) growth factors. Whereas the catalytic activity of Shp2 is required for all Shp2 actions, the effect of tyrosyl phosphorylation on Shp2 function has been controversial. To clarify the role of Shp2 tyrosyl phosphorylation, we infected Shp2-mutant fibroblasts with retroviruses expressing wild type Shp2 or mutants of either (Y542F or Y580F) or both (Y542F,Y580F) C-terminal tyrosines. Compared with wild type cells, ERK activation was decreased in Y542F- or Y580F-infected cells in response to fibroblast growth factor and PDGF but not the epidermal growth factor. Mutation of both phosphorylation sites resulted in a further decrease in growth factor-evoked ERK activation, although not to the level of the vector control. Immunoblot analyses confirm that Tyr-542 and Tyr-580 are the major sites of Shp2 tyrosyl phosphorylation and that Tyr-542 is the major Grb2 binding site. However, studies with antibodies specific for individual Shp2 phosphorylation sites reveal unexpected complexity in the mechanism of Shp2 tyrosyl phosphorylation by different receptor tyrosine kinases. Moreover, because Y580F mutants retain nearly wild type Grb2-binding ability, yet exhibit defective PDGF-evoked ERK activation, our results show that the association of Grb2 with Shp2 is not sufficient for promoting full ERK activation in response to these growth factors, thereby arguing strongly against the "Grb2-adapter" model of Shp2 action.