Protein tyrosine phosphorylation is a dynamic reversible process in which the level of phosphorylation, at any time, is the result of phosphatase and/or kinase activity. This balance is critical for control of growth and differentiation. The role of tyrosine phosphatases during nephrogenesis and in kidney disease requires delineation. Appropriate regulation of focal adhesion proteins such as focal adhesion kinase (FAK) and paxillin are important in cell adhesion, migration, and differentiation. We have previously shown that B cell lymphoma/leukemia-2 (bcl-2) / mice develop cystic kidneys and exhibit sustained phosphorylation of FAK and paxillin. We have examined the expression and activity of focal adhesion tyrosine phosphatases [Src homology-2 domain phosphatase (SHP-2), protein tyrosine phosphatase (PTP 1B), and PTP-proline, glutamate, serine, and threonine sequences (PEST)] during normal nephrogenesis and in cystic kidneys from bcl-2 / mice. Cystic kidneys from postnatal day 20 bcl-2 / mice demonstrate a reduced expression, sixfold decrease in activity, and altered distribution of SHP-2 and PTP 1B. PTP-PEST expression and distribution were similar in both bcl-2 +/+ and bcl-2 / mice. The altered regulation of PTP 1B and SHP-2 in kidneys from bcl-2 / mice correlates with sustained phosphorylation of FAK and paxillin. Thus renal cyst formation in the bcl-2 / mice may be the result of an inability of complete differentiation due to continued activation of growth processes, including activation of FAK and paxillin.