Calpains are ubiquitous calcium-regulated cysteine proteases that have been implicated in cytoskeletal organization, cell proliferation, apoptosis, cell motility, and hemostasis. Gene targeting was used to evaluate the physiological function of mouse calpain-1 and establish that its inactivation results in reduced platelet aggregation and clot retraction potentially by causing dephosphorylation of platelet proteins. Here, we report that calpain-1 null (Capn1-/-) platelets accumulate protein tyrosine phosphatase 1B (PTP1B), which correlates with enhanced tyrosine phosphatase activity and dephosphorylation of multiple substrates. Treatment of Capn1-/- platelets with bis(N,N-dimethylhydroxamido)hydroxooxovanadate, an inhibitor of tyrosine phosphatases, corrected the aggregation defect and recovered impaired clot retraction. More importantly, platelet aggregation, clot retraction, and tyrosine dephosphorylation defects were rescued in the double knockout mice lacking both calpain-1 and PTP1B. Further evaluation of mutant mice by the ferric chloride-induced arterial injury model suggests that the Capn1-/- mice are relatively resistant to thrombosis in vivo. Together, our results demonstrate that PTP1B is a physiological target of calpain-1 and suggest that a similar mechanism may regulate calpain-1-mediated tyrosine dephosphorylation in other cells.