Genetic screening in fission yeast has identified a gene named stp1+ that rescues cdc25-22 [Mondesert et al. (1994) J. Biol. Chem. 269, 27996-27999]. This gene encodes a 17.4 kDa protein that is 42% identical to members of the low molecular weight protein tyrosine phosphatases (low M(r)PTPases) previously known to exist only in mammalian species. A simple and efficient purification procedure was developed to obtain the homogeneous recombinant yeast low M(r)PTPase, Stp1, in large quantities suitable for kinetic and structural studies. Authentic Stp1 was produced as judged by amino terminal protein sequencing and electrospray ionization mass spectrometry analyses. Stp1 was shown to possess intrinsic phosphatase activity toward both aryl phosphates (such as phosphotyrosine) and alkyl phosphates (such as phosphoserine). Stp1 also dephosphorylated phosphotyrosyl peptide/protein substrates. The yeast enzyme was 6-fold slower than the mammalian enzymes, which made it amenable to pre-steady-state stopped-flow spectroscopic kinetic analysis at 30 degrees C and pH 6.0. Burst kinetics was observed with Stp1 using p-nitrophenyl phosphate as a substrate, suggesting that the rate-limiting step corresponds to the decomposition of the phosphoenzyme intermediate. Interestingly, the bovine heart low M(r)PTPase was capable of removing phosphate groups from both phosphotyrosyl and phosphoseryl/threonyl protein substrates with comparable efficiencies. The low M(r)PTPases, like the Cdc25 family of phosphatases, may represent a new group of dual specificity phosphatases which may be involved in cell cycle control.