Cdc25 protein phosphatase dephosphorylates tyrosine 15 of Cdc2, thereby activating Cdc2/cyclin B kinase, which then brings about mitosis. A fission yeast (Schizosaccharomyces pombe) cDNA expression library was screened for clones that rescue cdc25-22. In addition to the cdc25+ and pyp3+ protein-tyrosine phosphatase genes, a third gene was discovered. This gene, named stp1+ (small tyrosine phosphatase), encodes a approximately 17.5-kDa protein that is approximately 42% identical to members of an unusual class of small (approximately 18 kDa) cytosolic phosphatases previously known to exist only in mammalian species. The biological functions of these proteins are unknown, but they have vigorous protein-tyrosine phosphatase activity in vitro and have a sequence motif, Cys-X5-Arg, that is present at the active sites of all known types of protein-tyrosine phosphatases. Sequence homology between S. pombe Stp1 and its mammalian homologs is particularly high in the active site region of the proteins. Rescue of cdc25-22 by overproduction of Stp1 protein is probably due to an ability of Stp1 to dephosphorylate tyrosine 15 of Cdc2. Disruption of stp1+ causes no obvious phenotype. The fact that Stp1 homologs are highly conserved between yeast and man suggests that they have important functions.