Using an expression cloning strategy, cDNA encoding a human protein tyrosine-phosphatase was isolated. Bacteria expressing the kinase domain of the keratinocyte growth factor receptor (bek/fibroblast growth factor receptor-2) were infected with a fibroblast cDNA library in a phagemid prokaryotic expression vector and screened with a monoclonal anti- phosphotyrosine antibody. among several clones showing decreased anti- phosphotyrosine recognition, one displayed phosphatase activity toward the kinase in vitro. The 4.1-kilobase cDNA encoded a deduced protein of 185 amino acids with limited sequence similarity to the vaccinia virus phosphatase VH1. The purified recombinant protein dephosphorylated several activated growth factor receptors as well as serine- phosphorylated casein in vitro. Both serine and tyrosine phosphatase activities were completely abolished by mutagenesis of a single cysteine residue conserved in VH1 and the VH1-related human protein (VHR). These properties suggest that VHR is capable of regulating intracellular events mediated by both tyrosine and serine phosphorylation.