Hydrogen peroxide is a cell signaling agent that inactivates protein tyrosine phosphatases (PTPs) via oxidation of their catalytic cysteine residue. PTPs are inactivated rapidly during H2O2-mediated cellular signal transduction processes, but, paradoxically, hydrogen peroxide is a rather sluggish PTP inactivator in vitro. Here we present evidence that the biological buffer bicarbonate/CO2 potentiates the ability of H2O2 to inactivate PTPs. The results of biochemical experiments and high-resolution crystallographic analysis are consistent with a mechanism involving oxidation of the catalytic cysteine residue by peroxymonocarbonate generated via the reaction of H2O2 with HCO3-/CO2.