SHP-1-mediated dephosphorylation of protein tyrosine residues is central to the regulation of several cell signaling pathways, the specificity of which is dictated by the intrinsic affinity of SH2 domains for the flanking sequences of phosphotyrosine residues. By using a modified yeast two-hybrid system and SHP-1 as bait, we have cloned a human cDNA, PILRalpha, encoding a 303-amino acid immunoglobulin-like transmembrane receptor bearing two cytoplasmic tyrosines positioned within an immunoreceptor tyrosine-based inhibitory motif. Substrate trapping in combination with pervanadate treatment of 293T cells confirms that PILRalpha associates with SHP-1 in vivo upon tyrosine phosphorylation. Mutation of the tyrosine residues in PILRalpha indicates the pivotal role of the Tyr-269 residue in recruiting SHP-1. Surface plasmon resonance analysis further suggests that the association between PILRalpha-Tyr-269 and SHP-1 is mediated primarily via the amino-terminal SH2 domain of the latter. Polymerase chain reaction amplification of cDNA in combination with genomic sequence analysis revealed a second gene, PILRbeta, coding for a putative activating receptor as suggested by a truncated cytoplasmic tail and a charged lysine residue in its transmembrane region. The PILRalpha and PILRbeta genes are localized to chromosome 7 which is in contrast with the mapping of known members of the inhibitory receptor superfamily.