Studies with motheaten mice, which lack the SHP1 protein tyrosine phosphatase, indicate that this enzyme plays an important negative role in T cell antigen receptor (TCR) signaling. The physiological substrates for SHP1 in T lymphocytes, however, have remained unclear or controversial. To define these targets for SHP1 we have compared the effects of constitutively active and inactive mutants of SHP1 on TCR signaling. Expression of wild‐type SHP1 had a very small effect on the TCR‐induced tyrosine phosphorylation of ZAP‐70 and Syk, even when SHP1 was overexpressed 20 – 100‐fold over endogenous SHP1. Inactive SHP1‐D421A and wild‐type SHP2 were without effects. Constitutively active SHP1‐ΔSH2 had a more pronounced effect on ZAP‐70 and Syk, even when expressed at near physiological levels. SHP1‐ΔSH2 also inhibited events downstream of ZAP‐70 and Syk, such as activation of the mitogen‐activated protein kinase Erk2 and the transcriptional activation of the interleukin‐2 gene. In contrast, a constitutively active SHP2‐ΔSH2 had no statistically significant effect (although it caused a slight augmentation in some individual experiments). None of the constructs influenced the anti‐CD3‐induced tyrosine phosphorylation of the TCR ζ‐chain or phospholipase Cγ1, indicating that Src family kinase function was intact. Taken together, our findings support the notion that ZAP‐70 and Syk can be direct substrates for SHP1 in intact cells. However, the two SH2 domains of SHP1 did not facilitate its recognition of ZAP‐70 and Syk as substrates in intact cells. Therefore, we suggest that SHP1 is not actively recruited to inhibit TCR signaling induced by ligation of this receptor alone. Instead, we propose that ligation of a distinct inhibitory receptor leads to the recruitment of SHP1 via its SH2 domains, activation of SHP1 and subsequently inhibition of TCR signals if the inhibitory receptor is juxtaposed to the TCR.