CD45 is a leukocyte-specific, two domain transmembrane tyrosine phosphatase. Go-purification of a recombinant protein containing the first phosphatase domain of CD45 (6His-D1) with a recombinant protein containing the second phosphatase domain (GST-D2) from E. coli indicated a stable interaction which resulted in increased stability of the active phosphatase domain present in 6His-D1. This interaction was not dependent on the acidic region unique to CD45 domain 2, but was affected by a destabilizing point mutation (Q1180G) in GST-D2. CD45 domain 2 enhanced phosphatase activity of the first domain in the full length cytoplasmic domain protein, whereas a chimeric protein with the SH2 domain of p56(lck) in place of the CD45 C-terminal region did not. Thus the C-terminal domain of CD45 associates with the N-terminal domain and this stabilizes the active phosphatase domain. A single destabilizing point mutation in the second domain is sufficient to attenuate this effect.