The SH2-containing inositol 5'-phosphatase, SHIP1, negatively regulates signal transduction from the B cell antigen receptor (BCR). The mode of coupling between SHIP1 and the BCR has not been elucidated so far. In comparison to wild-type cells, B cells expressing a mutant IgD- or IgM-BCR containing a C-terminally truncated Ig-α respond to pervanadate stimulation with markedly reduced tyrosine phosphorylation of SHIP1 and augmented activation of protein kinase B. This indicates that SHIP1 is capable of interacting with the C-terminus of Ig-α. Employing a system of fluorescence resonance energy transfer in S2 cells, we can clearly demonstrate interaction between the SH2-domain of SHIP1 and Ig-α. Furthermore, a fluorescently labeled SH2-domain of SHIP1 translocates to the plasma membrane in an Ig-α-dependent manner. Interestingly, whereas the SHIP1 SH2-domain can be pulled-down with phospho-peptides corresponding to the immunoreceptor tyrosine-based activation motif (ITAM) of Ig-α from detergent lysates, no interaction between full-length SHIP1 and the phosphorylated Ig-α ITAM can be observed. Further studies show that the SH2-domain of SHIP1 can bind to the C-terminus of the SHIP1 molecule, most probably by inter- as well as intra-molecular means, and that this interaction regulates the association between different forms of SHIP1 and Ig-α.