Here, we present data suggesting a novel mechanism for regulation of natural killer (NK) cell cytotoxicity through inhibitory receptors. Interaction of activation receptors with their ligands on target cells induces cytotoxicity by NK cells. This activation is under negative control by inhibitory receptors that recruit tyrosine phosphatase SHP-1 upon binding major histocompatibility class I on target cells. How SHP-1 blocks the activation pathway is not known. To identify SHP-1 substrates, an HLA-C-specific inhibitory receptor fused to a substrate-trapping mutant of SHP-1 was expressed in NK cells. Phosphorylated Vav1, a regulator of actin cytoskeleton, was the only protein detectably associated with the catalytic site of SHP-1 during NK cell contact with target cells expressing HLA-C. Vav1 trapping was independent of actin polymerization, suggesting that inhibition of cellular cytotoxicity occurs through an early dephosphorylation of Vav1 by SHP-1, which blocks actin-dependent activation signals. Such a mechanism explains how inhibitory receptors can block activating signals induced by different receptors.In many cell types, activation induced by cell contact is controlled by inhibitory receptors that bind ligands on target cells (41, 48). The importance of this type of negative regulation is illustrated by the protection of normal cells from lysis by NK cells, of red blood cells from ingestion by macrophages (44), and of cardiomyocytes from immunoglobulin G (IgG)-mediated autoimmunity (43). A common feature of the receptors involved in these protective functions (i.e., CD158, SIRP-␣, and PD-1, respectively) and of many other receptors that inhibit cellular responses is the presence of immunoreceptor tyrosine-based inhibition motifs (ITIMs) in the cytoplasmic tail (12,48). Upon Tyr phosphorylation, ITIMs bind to the SH2 domains of protein tyrosine phosphatases (PTPases) SHP-1 and SHP-2, thereby releasing the catalytic site from autoinhibition (2, 12). Activation of human NK cell and T cell cytotoxicity is controlled by several inhibitory receptors, including the CD158 killer cell Ig-like receptors (KIR) and the lectin-like CD94/NKG2A, which bind to major histocompatibility complex (MHC) class I molecules expressed on target cells (5).Whereas the functional consequence of SHP-1 recruitment by ITIM-containing receptors in NK cells is well established, the specific point at which SHP-1 blocks activation signals has not been defined. Engagement of inhibitory receptors by ligands on target cells blocks conjugate formation (13), Ca 2ϩ flux (38, 52), polarization of lipid rafts in NK cells (42), and actin cytoskeleton rearrangement in T cells (26). As NK cell cytotoxicity depends on the activity of Tyr kinases (40), a number of Tyr-phosphorylated proteins are potential substrates for dephosphorylation by SHP-1. Two nonexclusive models, a "promiscuous" and a "selective" model, can be proposed for SHP-1-mediated inhibition. First, recruitment and activation of SHP-1 by inhibitory receptors at the NK-target cell interfac...