The G protein-coupled sst2 somatostatin receptor acts as a negative cell growth regulator. Sst2 transmits antimitogenic signaling by recruiting and activating the tyrosine phosphatase SHP-1. We now identified Src and SHP-2 as sst2-associated molecules and demonstrated their role in sst2 signaling. Surface plasmon resonance and mutation analyses revealed that SHP-2 directly associated with phosphorylated tyrosine 228 and 312, which are located in sst2 ITIMs (immunoreceptor tyrosine-based inhibitory motifs). This interaction was required for somatostatin-induced SHP-1 recruitment and activation and consequent inhibition of cell proliferation. Src interacted with sst2 and somatostatin promoted a transient Gbetagamma-dependent Src activation concomitant with sst2 tyrosine hyperphosphorylation and SHP-2 activation. These steps were abrogated with catalytically inactive Src. Both catalytically inactive Src and SHP-2 mutants abolished somatostatin-induced SHP-1 activation and cell growth inhibition. Sst2-Src-SHP-2 complex formation was dynamic. Somatostatin further induced sst2 tyrosine dephosphorylation and complex dissociation accompanied by Src and SHP-2 inhibition. These steps were defective in cells expressing a catalytically inactive Src mutant. All these data suggest that Src acts upstream of SHP-2 in sst2 signaling and provide evidence for a functional role for Src and SHP-2 downstream of an inhibitory G protein-coupled receptor.