SHP-2 is an Src homology 2 (SH2) domain-containing tyrosine phosphatase with crucial functions in cell signaling and major pathological implications. It stays inactive in the cytosol and is activated by binding through its SH2 domains to tyrosine-phosphorylated receptors on the cell surface. One such cell surface protein is PZR, which contains two tyrosine-based inhibition motifs responsible for binding of SHP-2. We have generated a glutathione S-transferase fusion protein carrying the tandem tyrosine-based inhibition motifs of PZR, and the protein was tyrosine-phosphorylated by co-expressing c-Src in Escherichia coli cells. The purified phosphoprotein displays a strong binding to SHP-2 and causes its activation in vitro. However, when introduced into NIH 3T3 cells by using a protein delivery reagent, it effectively inhibited the activation of ERK1/2 induced by growth factors and serum but not by phorbol ester, in reminiscence of the effects caused by expression of dominant negative SHP-2 mutants and deletion of functional SHP-2. The data suggest that the exogenously introduced PZR protein specifically binds SHP-2, blocks its translocation, and renders it functionally incompetent. This is further supported by the fact that the phosphorylated PZR protein had no inhibitory effects on fibroblasts derived from mice expressing only a mutant SHP-2 protein lacking most of the N-terminal SH2 domain. This study thus provides a novel and highly specific method to interrupt the function of SHP-2 in cells.