Abstract Pep and CD45 are tyrosine phosphatases whose targets include the Src-family kinases, critical mediators of antigen receptor signaling. A polymorphism in PTPN22, the gene that encodes the human Pep ortholog Lyp, confers susceptibility to multiple human autoimmune diseases. However, the significance of the R620W risk allele is not clear. We report that misexpression of wild type or R620W Lyp/Pep in Jurkat cells, in the context of their binding partner Csk, unmasks the risk allele as a hypomorph. Although Pep deficient mice on the B6 background have hyper-responsive memory T cells, they fail to develop autoimmune disease. Mice containing a point mutation in CD45 (E613R) develop a B cell-driven lupus-like disease on the mixed 129/B6, but not on the B6 background. To model in mice how human susceptibility loci such as PTPN22 cooperate to provoke autoimmune disease, we studied the ability of Pep deficiency to act as a genetic modifier of the CD45 E613R mutation on the non-autoimmune B6 background. Double mutant mice develop a lupus-like disease as well as a lymphoproliferative syndrome. Following antigen receptor stimulation, peripheral B cells in the double mutant mice phenocopy hyper-responsive CD45 E613R B cells, whereas peripheral T cells respond like Pep-/- T cells. These studies suggest that Pep-/- T cells in the context of a susceptible microenvironment can drive hyper-responsive CD45 E613R B cells to break tolerance.