Cerebral malaria induced by Plasmodium berghei ANKA infection is dependent on the sequestration of cytotoxic T cells within the brain and augmentation of the inflammatory response. Herein, we demonstrate that inhibition of protein tyrosine phosphatase (PTP) activity significantly attenuates T cell sequestration within the brain and prevents the development of neuropathology. Mechanistically, the initial upregulation of CXCR3 on splenic T cells upon T cell receptor stimulation was critically decreased through the reduction of T cell-intrinsic PTP activity. Furthermore, PTP inhibition markedly increased IL-10 production by splenic CD4+ T cells by enhancing the frequency of LAG3+CD49b+ type 1 regulatory cells. Overall, these findings demonstrate that modulation of PTP activity could possibly be utilized in the treatment of cerebral malaria and other CXCR3-mediated diseases.