During vertebrate neuromuscular junction (NMJ) development, nerve-secreted agrin induces acetylcholine receptor (AChR) clustering in muscle by activating the muscle-specific tyrosine kinase MuSK. Recently, it has been recognized that MuSK activation-dependent AChR clustering occurs in embryonic muscle even in the absence of agrin, but how this process is regulated is poorly understood. We report that inhibition of tyrosine phosphatases in cultured C2 mouse myotubes using pervanadate enhanced MuSK auto-activation and agrin-independent AChR clustering. Moreover, phosphatase inhibition also enlarged the AChR clusters induced by agrin in these cells. Conversely, in situ activation of MuSK in cultured Xenopus embryonic muscle cells, either focally by anti-MuSK antibody-coated beads or globally by agrin, stimulated downstream tyrosine phosphatases, which could be blocked by pervanadate treatment. Immunoscreening identified Shp2 as a major tyrosine phosphatase in C2 myotubes and down-regulation of its expression by RNA interference alleviated tyrosine phosphatase suppression of MuSK activation. Significantly, depletion of Shp2 increased both agrin-independent and agrin-dependent AChR clustering in myotubes. Our results suggest that muscle tyrosine phosphatases tightly regulate MuSK activation and signaling and support a novel role of Shp2 in MuSK-dependent AChR clustering.