Abstract Chronic myelogenous leukemia (CML) is the most common myeloproliferative disease. Protein tyrosine phosphatase receptor type γ (PTPRG) is a tumor suppressor gene and a myeloid cell marker expressed by CD34+ cells. Downregulation of PTPRG increases colony formation in the PTPRG-positive megakaryocytic cell lines MEG-01 and LAMA-84 but has no effect in the PTPRG-negative cell lines K562 and KYO-1. Its overexpression has an oncosuppressive effect in all these cell lines and is associated with myeloid differentiation and inhibition of BCR/ABL-dependent signaling. The intracellular domain of PTPRG directly interacts with BCR/ABL and CRKL, but not with signal transducers and activators of transcription 5. PTPRG is downregulated at the mRNA and protein levels in leukocytes of CML patients in both peripheral blood and bone marrow, including CD34+ cells, and is reexpressed following molecular remission of disease. Reexpression was associated with a loss of methylation of a CpG island of PTPRG promoter occurring in 55% of the patients analyzed. In K562 cell line, the DNA hypomethylating agent 5-aza-2′-deoxycytidine induced PTPRG expression and caused an inhibition of colony formation, partially reverted by downregulation of PTPRG expression. These findings establish, for the first time, PTPRG as a tumor suppressor gene involved in the pathogenesis of CML, suggesting its use as a potential diagnostic and therapeutic target. Cancer Res; 70(21); 8896–906. ©2010 AACR.