cDNA encoding a receptor-like protein-tyrosine-phosphatase (PTP) termed DEP-1 was isolated from a HeLa cell library. The cDNA predicts an enzyme consisting of an extracellular segment containing eight fibronectin type III repeats, a single transmembrane segment, and a single intracellular PTP domain. Following expression of DEP-1 cDNA in COS cells a glycoprotein of 180 kDa was detected and PTP activity was demonstrated in immunocomplexes with a C-terminal peptide antiserum. Endogenous DEP-1 was detected in WI-38 human embryonic lung fibroblasts by immunoblotting and immunocomplex PTP assays. Immunoblot analysis of DEP-1 expression in WI-38 cells revealed dramatically increased levels and activity of the PTP in dense cultures relative to sparse cultures. Also, DEP-1 activity, detected in PTP assays of immunocomplexes, was increased in dense cell cultures. In contrast, the expression levels of PTP-1B did not change with cell density. This enhancement of DEP-1 expression with increasing cell density was also observed in another fibroblast cell line, AG1518. The increase in DEP-1 occurs gradually with increasing cell contact and is initiated before saturation cell density is reached. These observations suggest that DEP-1 may contribute to the mechanism of contact inhibition of cell growth.