Signal Transducer and Activator of Transcription (STAT) proteins are a family of latent cytoplasmic transcription factors that are activated by tyrosine phosphorylation after cytokine stimulation. One mechanism by which STAT signaling is regulated is by dephosphorylation through the action of protein tyrosine phosphatases (PTP). We have identified PTP-Basophil like (PTP-BL) as a STAT PTP. PTP-BL dephosphorylates STAT proteins in vitro and in vivo, resulting in attenuation of STAT-mediated gene activation. In CD4(+) T cells, PTP-BL deficiency leads to increased and prolonged activation of STAT4 and STAT6, and consequently enhanced T helper 1 (Th1) and Th2 cell differentiation. Taken together, our findings demonstrate that PTP-BL is a physiologically important negative regulator of the STAT signaling pathway.