The T-lineage restricted protein THEMIS has been shown to play a critical role in T cell development. THEMIS, via its distinctive CABIT domains, inhibits the catalytic activity of the tyrosine phosphatase SHP1 (PTPN6). SHP1 and THEMIS bind to the ubiquitous cytosolic adapter GRB2, and the purported formation of a tri-molecular THEMIS–GRB2–SHP1 complex facilitates inactivation of SHP1 by THEMIS. The importance of this function of GRB2 among its numerous documented activities is unclear as GRB2 binds to multiple proteins and participates in several signaling responses in thymocytes. Here, we show that similar to Themis−/− thymocytes, the primary molecular defect in GRB2-deficient thymocytes is increased catalytically active SHP1 and the developmental block in GRB2-deficient thymocytes is alleviated by deletion or inhibition of SHP1 and is exacerbated by SHP1 overexpression. Thus, the principal role of GRB2 during T cell development is to promote THEMIS-mediated inactivation of SHP1 thereby enhancing the sensitivity of TCR signaling in CD4+CD8+ thymocytes to low affinity positively selecting self-ligands.