Cell-cell adhesion is a dynamic process that can activate multiple signaling pathways. These signaling pathways can be regulated through reversible tyrosine phosphorylation events. The level of tyrosine phosphorylation of junctional proteins reflects the balance between protein-tyrosine kinase and protein-tyrosine phosphatase activity. The receptor-tyrosine phosphatase DEP-1 (CD148/PTP-eta) has been implicated in cell growth and differentiation as well as in regulating phosphorylation of junctional proteins. However, the role of DEP-1 in regulating tight junction phosphorylation and the integrity of cell-cell junctions is still under investigation. In this study, we used a catalytically dead substrate-trapping mutant of DEP-1 to identify potential substrates at cell-cell junctions. We have shown that in epithelial cells the trapping mutant of DEP-1 interacts with the tight junction proteins occludin and ZO-1 in a tyrosine phosphorylation-dependent manner. In contrast, PTP-PEST, Shp2, and PTPmu did not interact with these proteins, suggesting that the interaction of DEP-1 with occludin and ZO-1 is specific. In addition, occludin and ZO-1 were dephosphorylated by DEP-1 but not these other phosphatases in vitro. Overexpression of DEP-1 increased barrier function as measured by transepithelial electrical resistance and also reduced paracellular flux of fluorescein isothiocyanate-dextran following a calcium switch. Reduced DEP-1 expression by small interfering RNA had a small but significant increase in junction permeability. These data suggest that DEP-1 can modify the phosphorylation state of tight junction proteins and play a role in regulating permeability.