We have shown recently that vascular endothelial protein tyrosine phosphatase (VE-PTP), an endothelial-specific membrane protein, associates with vascular endothelial (VE)–cadherin and enhances VE-cadherin function in transfected cells (Nawroth, R., G. Poell, A. Ranft, U. Samulowitz, G. Fachinger, M. Golding, D.T. Shima, U. Deutsch, and D. Vestweber. 2002. EMBO J. 21:4885–4895). We show that VE-PTP is indeed required for endothelial cell contact integrity, because down-regulation of its expression enhanced endothelial cell permeability, augmented leukocyte transmigration, and inhibited VE-cadherin–mediated adhesion. Binding of neutrophils as well as lymphocytes to endothelial cells triggered rapid (5 min) dissociation of VE-PTP from VE-cadherin. This dissociation was only seen with tumor necrosis factor α–activated, but not resting, endothelial cells. Besides leukocytes, vascular endothelial growth factor also rapidly dissociated VE-PTP from VE-cadherin, indicative of a more general role of VE-PTP in the regulation of endothelial cell contacts. Dissociation of VE-PTP and VE-cadherin in endothelial cells was accompanied by tyrosine phoshorylation of VE-cadherin, β-catenin, and plakoglobin. Surprisingly, only plakoglobin but not β-catenin was necessary for VE-PTP to support VE-cadherin adhesion in endothelial cells. In addition, inhibiting the expression of VE-PTP preferentially increased tyrosine phosphorylation of plakoglobin but not β-catenin. In conclusion, leukocytes interacting with endothelial cells rapidly dissociate VE-PTP from VE-cadherin, weakening endothelial cell contacts via a mechanism that requires plakoglobin but not β-catenin.