We have isolated a cDNA of a novel cytoplasmic variant of the protein tyrosine phosphatase epsilon (PTP epsilon) from rat spleen cDNA library. Its deduced amino acid sequence of 642 residues was 94.6% identical to C-terminal 642 residues of human PTP epsilon (HPTP epsilon). However. N-terminal 12 amino acid residues of the rat PTP epsilon had no homology to HPTP epsilon. The unique N-terminal sequence of the rat PTP epsilon was shorter and much more hydrophilic than the transmembrane domain of HPTP epsilon. These results strongly suggest that the rat PTP epsilon, designated here as PTP epsilon C. is a novel cytoplasmic PTP with two tandem catalytic domains. We also isolated by RT-PCR a rat transmembrane PTP epsilon cDNA, designated as PTP epsilon M, which has the extracellular and transmembrane domains in addition to the common sequence to the PTP epsilon C. These results suggested that the PTP epsilon C and PTP epsilon M are generated from a single gene and may be involved in multiple functions in signal transduction. (C) 1996 Academic Press, Inc.