RPTPmu is a recently described receptor-like protein tyrosine phosphatase (PTP), the ectodomain of which mediates homophilic cell-cell adhesion. The cytoplasmic part contains two homologous PTP-like domains and a juxtamembrane region that is about twice as large as in other receptor-like PTPs. The entire 80-kDa cytoplasmic part of human RPTPmu was expressed in insect Sf9 cells and its enzymatic activity was characterized after purification to electrophoretic homogeneity. In addition, the effects of deletion and point mutations were analyzed following expression in Escherichia coli cells. The purified cytoplasmic part of RPTPmu displays high activity toward tyrosine-phosphorylated, modified lysozyme (V(max) 4500 nmol min-1 mg-1) and myelin basic protein (V(max) 8500 nmol min-1 mg-1) but negligible activity toward tyrosine-phosphorylated angiotensin or the nonapeptide, EDNDpYINASL, that serves as a good substrate for protein tyrosine phosphatase PTP1B. This suggests that RPTPmu and PTP1B have distinct substrate specificities. Catalytic activity is independent of Ca2+ (up to 1 mM) but is strongly inhibited by Zn2+, Mn2+, vanadate, phenylarsenic oxide, and heparin. The first of the two catalytic domains is 5-10 times less active than the expressed catalytic region containing both domains. Mutation of Cys 1095 to Ser in the first catalytic domain abolishes enzymatic activity when analyzed following expression in either E. coli or mammalian COS cells. Deletion of the first 53 amino acids from the juxtamembrane region reduces catalytic activity about 2-fold.