Src homology 2 domain-containing protein tyrosine phosphatase (SHP) substrate-1 (SHPS-1) is a transmembrane protein that is expressed predominantly in macrophages. Its extracellular region interacts with the transmembrane ligand CD47 expressed on the surface of adjacent cells, and its cytoplasmic region binds the protein tyrosine phosphatases SHP-1 and SHP-2. Phagocytosis of IgG-or complement-opsonized RBCs by peritoneal macrophages derived from mice that express a mutant SHPS-1 protein that lacks most of the cytoplasmic region was markedly enhanced compared with that apparent with wild-type macrophages. This effect was not observed either with CD47-deficient RBCs as the phagocytic target or in the presence of blocking Abs to SHPS-1. Depletion of SHPS-1 from wild-type macrophages by RNA interference also promoted FcγR-mediated phagocytosis of wild-type RBCs. Ligation of SHPS-1 on macrophages by CD47 on RBCs promoted tyrosine phosphorylation of SHPS-1 and its association with SHP-1, whereas tyrosine phosphorylation of SHPS-1 was markedly reduced in response to cross-linking of FcγRs. Treatment with inhibitors of PI3K or of Syk, but not with those of MEK or Src family kinases, abolished the enhancement of FcγR-mediated phagocytosis apparent in macrophages from SHPS-1 mutant mice. In contrast, FcγR-mediated tyrosine phosphorylation of Syk, Cbl, or the γ subunit of FcR was similar in macrophages from wild-type and SHPS-1 mutant mice. These results suggest that ligation of SHPS-1 on macrophages by CD47 promotes the tyrosine phosphorylation of SHPS-1 and thereby prevents the FcγR-mediated disruption of the SHPS-1-SHP-1 complex, resulting in inhibition of phagocytosis. The inhibition of phagocytosis by the SHPS-1-SHP-1 complex may be mediated at the level of Syk or PI3K signaling.