Because the Sprouty (Spry) proteins were shown to be inhibitors of the mainstream Ras/ERK pathway, there has been considerable interest in ascertaining their mechanism of action especially since a possible role as tumor suppressors for these inhibitory proteins has been suggested. We compared the ability of the mammalian Spry isoforms to inhibit the Ras/ERK pathway in the context of fibroblast growth factor receptor (FGFR) signaling. Spry2 is considerably more inhibitory than Spry1 or Spry4, and this correlates with the binding to Grb2 via a C-terminal proline-rich sequence that is found exclusively on Spry2. This PXXPXR motif binds directly to the N-terminal Src homology domain 3 of Grb2, and when added onto the C terminus of Spry4 the resultant chimera inhibits the Ras/ERK pathway. The ability to inhibit neurite outgrowth in PC-12 cells correlates with the propensity of Spry isoforms and engineered constructs to inhibit the phosphorylation of ERK1/2. The PXXPXR motif is cryptic in unstimulated cells, and it is postulated that Spry2 undergoes a conformational change following FGFR stimulation, enabling the subsequent interaction with Grb2. We present evidence that Spry2 can compete with the RasGEF (guanine nucleotide exchange factor) SOS1 for binding to Grb2, resulting in the inhibition of phosphorylation of ERK1/2.