Contact-induced growth inhibition is a characteristic feature of normal cells grown in monolayer. The importance of reversible tyrosine phosphorylation in mitogenic signaling, together with earlier reports of increased levels of protein-tyrosine phosphatases (PTPs) in densely cultured cells, has led to the proposal that PTPs may be involved in mediating contact inhibition of cell growth. We have compared net levels of ligand-induced tyrosine phosphorylation of the epidermal growth factor (EGF) receptor in mink lung epithelial cells cultured under sparse or dense conditions. The levels of net tyrosine phosphorylation of the stimulated EGF receptor was found to be more than 4-fold higher in sparse cultures. This difference was greatly reduced when cells were pretreated with the PTP inhibitor phenyl arsine oxide. Monitoring of dephosphorylation rates in vivo of the stimulated EGF receptors revealed increased EGF receptor-directed PTP activity in dense cultures. The platelet-derived growth factor -receptor, expressed in stably transfected porcine aortic endothelial cells, also displayed lower levels of ligand induced net tyrosine phosphorylation in cells from dense cultures. This density-dependent difference in tyrosine phosphorylation was reduced by pretreatment of cultures with the PTP inhibitor orthovanadate. A PTP-mediated decrease of the in vivo net levels of ligand induced tyrosine phosphorylation of EGF and plateletderived growth factor receptors in cells at high density have thus been demonstrated. Loss of this previously unnoticed regulatory pathway may be involved in cellular transformation.Contact-induced growth inhibition is a characteristic feature of normal cells grown in monolayer. This negative growth regulatory mechanism is lost in many tumor cells. The molecular events underlying contact inhibition remain largely unknown. The importance of reversible tyrosine phosphorylation in growth factor-induced mitogenic signaling, together with the potential of protein-tyrosine phosphatases (PTPs) 1 to antagonize tyrosine kinase signaling, has led to the proposal that PTPs may be involved in contact inhibition (for a recent review see Ref. 1). The finding that treatment of normal rat kidney cells with the PTP inhibitor orthovanadate relieved cells from contact inhibition of cell growth provided early experimental support for this hypothesis (2). During recent years additional data have been obtained that support this idea.Increased PTP activity in membrane fractions or cell lysates from cells harvested at high cell densities has been reported (3-5). Cell density-dependent up-regulation of the receptor-like PTPs density-enhanced phosphatase-1 and PTP-at the protein level has been demonstrated (6, 7). Comparison of mRNA levels of PTPs in growing and contact-inhibited cells also revealed higher mRNA levels for PTP-in dense cells (8). The demonstration of specific homophilic interactions of the extracellular domains of the transmembrane PTP-and -also points toward a role in cell contact-induced signaling (9 -11)...