Recent data implicating loss of PTP1C tyrosine phosphatase activity in the genesis of the multiple hemopoietic cell defects found in systemic autoimmune/immunodeficient motheaten (me) and viable motheaten (mev) mice suggest that PTP1C plays an important role in modulating intracellular signaling events regulating cell activation and differentiation. To begin elucidating the role for this cytosolic phosphatase in lymphoid cell signal transduction, we have examined early signaling events and mitogenic responses induced by B cell antigen receptor (BCR) ligation in me and mev splenic B cells and in CD5+ CH12 lymphoma cells, which represent the lymphoid population amplified in motheaten mice. Despite their lack of functional PTP1C, me and mev B cells proliferated normally in response to LPS. However, compared with wild-type B cells, cells from the mutant mice were hyperresponsive to normally submitogenic concentrations of F(ab')2 anti-Ig antibody, and they exhibited reduced susceptibility to the inhibitory effects of Fc gamma IIRB cross-linking on BCR-induced proliferation. Additional studies of unstimulated CH12 and wild-type splenic B cells revealed the constitutive association of PTP1C with the resting BCR complex, as evidenced by coprecipitation of PTP1C protein and phosphatase activity with BCR components and the depletion of BCR-associated tyrosine phosphatase activity by anti-PTP1C antibodies. These results suggest a role for PTP1C in regulating the tyrosine phosphorylation state of the resting BCR complex components, a hypothesis supported by the observation that PTP1C specifically induces dephosphorylation of a 35-kD BCR-associated protein likely representing Ig-alpha. In contrast, whereas membrane Ig cross-linking was associated with an increase in the tyrosine phosphorylation of PTP1C and an approximately 140-kD coprecipitated protein, PTP1C was no longer detected in the BCR complex after receptor engagement, suggesting that PTP1C dissociates from the activated receptor complex. Together these results suggest a critical role for PTP1C in modulating BCR signaling capacity, and they indicate that the PTP1C influence on B cell signaling is likely to be realized in both resting and activated cells.