Despite significant evidence to the contrary, the view that phosphatases are "nonspecific" still pervades the field. Systems biology approaches to defining how signal transduction pathways are integrated at the level of whole organisms also often downplay the contribution of phosphatases, defining them as "erasers" that serve merely to restore the system to its basal state. Here, we present a study that counteracts the idea of "nonspecific phosphatases." We have characterized two structurally similar and functionally related kinases, BRK and SRC, which are regulated by combinations of activating autophosphorylation and inhibitory C-terminal sites of tyrosine phosphorylation. We demonstrated specificity at the level of the kinases in that SRMS phosphorylated the C terminus of BRK, but not SRC; in contrast, CSK is the kinase responsible for C-terminal phosphorylation of SRC, but not BRK. For the phosphatases, we observed that RNAi-mediated suppression of PTP1B resulted in opposing effects on the activity of BRK and SRC and have defined the mechanisms underlying this specificity. PTP1B inhibited BRK by directly dephosphorylating the Tyr-342 autophosphorylation site. In contrast, PTP1B potentiated SRC activity, but not by dephosphorylating SRC itself directly; instead, PTP1B regulated the interaction between CBP/PAG and CSK. SRC associated with, and phosphorylated, the transmembrane protein CBP/PAG at Tyr-317, resulting in CSK recruitment. We identified PAG as a substrate of PTP1B, and dephosphorylation abolished recruitment of the inhibitory kinase CSK. Overall, these findings illustrate how the combinatorial effects of PTKs and PTPs may be integrated to regulate signaling, with both classes of enzymes displaying exquisite specificity.