The Saccharomyces cerevisiae mating pheromone response is mediated by activation of a MAP kinase (Fus3p and Kss1p) signaling pathway. Pheromone stimulation causes cell cycle arrest. Therefore, inactivation of the Fus3p and Kss1p MAP kinases is required during recovery phase for the resumption of cell growth. We have isolated a novel protein tyrosine phosphatase gene, PTP3, as a negative regulator of this pathway. Ptp3p directly dephosphorylates and inactivates Fus3p MAP kinase in vitro. Multicopy PTP3 represses pheromone-induced transcription and promotes recovery. In contrast, disruption of PTP3 in combination with its homolog PTP2 results in constitutive tyrosine phosphorylation, enhanced kinase activity of Fus3p MAP kinase on stimulation, and delayed recovery from the cell cycle arrest. Both tyrosine phosphorylation and kinase activity of Fus3p are further increased by disruption of PTP3 and PTP2 in combination with MSG5, which encodes a dual-specificity phosphatase. Cells deleted for all three of the phosphatases (ptp2delta ptp3delta msg5delta) are hypersensitive to pheromone and exhibit a severe defect in recovery from pheromone-induced growth arrest. Our data indicate that Ptp3p is the major phosphatase responsible for tyrosine dephosphorylation of Fus3p to maintain a low basal activity; it also has important roles, along with Msg5p, in inactivation of Fus3p following pheromone stimulation. These data present the first evidence for a coordinated regulation of MAP kinase function through differential actions of protein tyrosine phosphatases and a dual-specificity phosphatase.