Shp2 is a nonreceptor protein tyrosine phosphatase (PTP) encoded by the PTPN11 gene. It is involved in growth factorinduced activation of mitogen-activated protein (MAP) kinases Erk1 and Erk2 (Erk1/2) and has been implicated in the pathogenicity of the oncogenic bacterium Helicobacter pylori. Moreover, gain-of-function Shp2 mutations have been found in childhood leukemias and Noonan syndrome. Thus, small molecule Shp2 PTP inhibitors are much needed reagents for evaluation of Shp2 as a therapeutic target and for chemical biology studies of Shp2 function. By screening the National Cancer Institute (NCI) Diversity Set chemical library, we identified 8-hydroxy-7-(6-sulfonaphthalen-2-yl)diazenyl-quinoline-5-sulfonic acid (NSC-87877) as a potent Shp2 PTP inhibitor. Molecular modeling and site-directed mutagenesis studies suggested that NSC-87877 binds to the catalytic cleft of Shp2 PTP. NSC-87877 cross-inhibited Shp1 in vitro, but it was selective for Shp2 over other PTPs (PTP1B, HePTP, DEP1, CD45, and LAR). It is noteworthy that NSC-87877 inhibited epidermal growth factor (EGF)-induced activation of Shp2 PTP, Ras, and Erk1/2 in cell cultures but did not block EGF-induced Gab1 tyrosine phosphorylation or Gab1-Shp2 association. Furthermore, NSC-87877 inhibited Erk1/2 activation by a Gab1-Shp2 chimera but did not affect the Shp2-independent Erk1/2 activation by phorbol 12-myristate 13-acetate. These results identified NSC-87877 as the first PTP inhibitor capable of inhibiting Shp2 PTP in cell cultures without a detectable off-target effect. Our study also provides the first pharmacological evidence that Shp2 mediates EGF-induced Erk1/2 MAP kinase activation.