The SH2-containing inositol-5'-phosphatase, SHIP, restrains bone marrow-derived mast cell (BMMC) degranulation, at least in part, by hydrolyzing phosphatidylinositol (PI)-3-kinase generated PI-3,4,5-P(3) (PIP3) to PI-3,4-P(2). To determine which domains within SHIP influence its ability to hydrolyze PIP3, bone marrow from SHIP(-/-) mice was retrovirally infected with various SHIP constructs. Introduction of wild-type SHIP into SHIP(-/-) BMMCs reverted the Steel factor (SF)-induced increases in PIP3, calcium entry, and degranulation to those observed in SHIP(+/+) BMMCs. A 5'-phosphatase dead SHIP, however, could not revert the SHIP(-/-) response, whereas a SHIP mutant in which the 2 NPXY motifs were converted to NPXFs (2NPXF) could partially revert the SHIP(-/-) response. SF stimulation of BMMCs expressing the 2NPXF, which could not bind Shc, led to the same level of mitogen-activated protein kinase (MAPK) phosphorylation as that seen in BMMCs expressing the other constructs. Surprisingly, C-terminally truncated forms of SHIP, lacking different amounts of the proline rich C-terminus, could not revert the SHIP(-/-) response at all. These results suggest that the C-terminus plays a critical role in enabling SHIP to hydrolyze PIP(3) and inhibit BMMC degranulation.