Focal adhesions are sites of cell‐extracellular matrix interactions that function in anchoring stress fibers to the plasma membrane and in adhesion‐mediated signal transduction. Both focal adhesion structure and signaling ability involve protein tyrosine phosphorylation. LAR is a broadly expressed transmembrane protein tyrosine phosphatase comprised of a cell adhesion‐like ectodomain and two intracellular protein tyrosine phosphatase domains. We have identified a novel cytoplasmic 160 kDa phosphoserine protein termed LAR‐interacting protein 1 (LIP.1), which binds to the LAR membrane‐distal D2 protein tyrosine phosphatase domain and appears to localize LAR to focal adhesions. Both LAR and LIP.1 decorate the ends of focal adhesions most proximal to the cell nucleus and are excluded from the distal ends of focal adhesions, thus localizing to regions of focal adhesions presumably undergoing disassembly. We propose that LAR and LIP.1 may regulate the disassembly of focal adhesions and thus help orchestrate cell‐matrix interactions.