pp60(c-src)kinase activity can be increased by phosphotyrosine dephosphorylation or growth factor-dependent phosphorylation reactions. Expression of the transmembrane phosphotyrosine phosphatase (PTPase) CD45 has been shown to inhibit growth factor receptor signal transduction (Mooney, RA, Freund, GG, Way, BA and Bordwell, KL (1992) J Biol Chem 267, 23443-23446). Here it is shown that PTPase expression decreased platelet-derived growth factor (PDGF)-dependant activation of pp60(c-src) but failed to increase hormone independent (basal) pp60(c-src) activity. PDGF-dependent tyrosine phosphorylation of its receptor was reduced by approximately 60% in cells expressing the PTPase. In contrast, a change in phosphotyrosine content of pp60(c-src) was not detected in response to PDGF or in PTPase+ cells. PDGF increased the intrinsic tyrosine kinase activity of pp60(c-src) in both control and PTPase+ cells, but the effect was smaller in PTPase+ cells. In an in vitro assay, hormone-stimulated pp60(c-src) autophosphorylation from PTPase+ cells was decreased 64 +/- 22%, and substrate phosphorylation by pp60(c-src) was reduced 54 +/- 16% compared to controls. Hormone-independent pp60(c-src) kinase activity was unchanged by expression of the PTPase. pp60(c-src) was, however, an in vitro substrate for CD45, being dephosphorylated at both the regulatory (Tyr(527)) and kinase domain (Tyr(416)) residues. In addition, in vitro dephosphorylation by CD45 increased pp60(c-src) activity. These findings suggest that the PDGF receptor was an in vivo substrate of CD45 but pp60(c-src) was not. The lack of activation of pp60(c-src) in the presence of expressed PTPase may demonstrate the importance of compartmentalization and/or accessory proteins to PTPase-substrate interactions.