Using an expression cloning strategy, we isolated a cDNA encoding a human protein-tyrosine-phosphatase. 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 (VHR) human protein. These properties suggest that VHR is capable of regulating intracellular events mediated by both tyrosine and serine phosphorylation.