The p34cdc2 M-phase kinase is regulated by inhibitory phosphorylation of Tyr15, largely through the actions of the p107wee1 tyrosine kinase and p80cdc25 protein tyrosine phosphatase (PTPase). In this study we demonstrate that a second PTPase, encoded by pyp3, also contributes to tyrosyl dephosphorylation of p34cdc2. Pyp3 was identified as a high copy suppressor of a cdc25- mutation. The pyp3 gene encodes a 33 kDa PTPase that is more closely related to human PTP1B and fission yeast pyp1 and pyp2 PTPases than to cdc25. Pyp3 does not share an essential overlapping function with pyp1 or pyp2. We demonstrate that disruption of pyp3 causes a mitotic delay that is greatly exacerbated in cells that are partially defective for cdc25 function and that pyp3 function is essential in cdc25-disruption wee1- strains. Pyp3 PTPase effectively dephosphorylates and activates the p34cdc2 kinase in vitro. We conclude that the pyp3 PTPase acts cooperatively with p80cdc25 to dephosphorylate Tyr15 of p34cdc2.