Photoaffinity labeling has been used to identify amino acids involved in recognition of protein substrates by the protein-tyrosine phosphatase PTP1, The photoactive amino acid p-benzoylphenylalanine (Bpa) was incorporated into a phosphotyrosine containing peptide derived from epidermal growth factor autophosphorylation site Tyr(992) (EGFR(988-998)). This peptide photoinactivated PTP1 in a time- and concentration-dependent manner. Three lines of evidence indicate that the interaction between PTP1 and the photoaffinity label was specific: 1) photoinactivation was inhibited in the presence of a non-Bpa-containing peptide from EGFR Tyr(992) in molar excess, 2) The photoaffinity label-containing phosphopeptide was rapidly dephosphorylated by PTP1 with kinetic constants similar to those of the non-Bpa-containing peptide under identical conditions. 3) After complete photoinactivation, the level of incorporation of radioactive photoaffinity label into PTP1 was approximately 0.9 mol of label/mol of enzyme, consistent with a 1:1 stoichiometry of photolabeling. Radiolabeled peptide was used to identify sites of cross-linking to PTP1. Bpa peptide-PTP1 was digested with trypsin, and radioactive fragments were purified by high performance liquid chromatography (HPLC) and analyzed by Edman sequencing. In two parallel experiments which were analyzed using different HPLC columns, a site in the alpha 2' region of PTP1, most likely Ile(23), was labeled by the Tyr(992)-derived peptide. The results are discussed in light of the crystal structure of human PTP1B and suggest that an additional mode of substrate recognition must exist for PTP1 catalysis.