Protein tyrosine phosphatase 1B (PTP1B) is an abundant intracellular enzyme that is thought to act as a negative regulator of certain signaling pathways. The C terminus of PTP1B contains two proline-rich regions which conform to the canonical class II Src homology 3 domain binding motif, Pro-X-X-Pro-X-Arg. In this study, we establish that PTP1B interacts with Crk, Grb2, and p130(Cas) in vitro and with at least one of these, p130(Cas), in intact cells. The interaction of PTP1B and p130(Cas) is independent of tyrosine phosphorylation but can be disrupted by replacing two critical proline residues in the proline-rich domain of PTP1B between amino acids 301 and 315. When wild-type PTP1B is expressed in 3Y1-v-crk cells, p130(Cas) shows substantial dephosphorylation, whereas the PTP1B proline mutant does not have this effect. In 3Y1 and 3Y1 v-crk-transformed fibroblasts, almost all of the total PTP1B and about 40% of total p130(Cas) co-sediment with membranes composed primarily of endoplasmic reticulum. These results suggest that the proline-rich domain between amino acids 301 and 315 in PTP1B binds Src homology 3-containing proteins and that p130(Cas) may be a physiological target of this phosphatase in cells.