Members of the cdc25 phosphatase family are proposed to function as important regulators of the eukaryotic cell cycle, particularly in the induction of mitotic events. A new cdc25 tyrosine phosphatase, cdc25M1, has been cloned from a mouse pre-B cell cDNA library and characterized. The cdc25M1 protein consists of 465 amino acids with a predicted relative molecular mass (M(r)) of 51,750. Over the highly conserved carboxyl terminal region, the amino acid sequence similarity to the human cdc25 C or Hs1 isoform is 89%, while the overall similarity is 67%. The phosphatase active site is located within residues 367-374. Tissue expression of the cdc25M1 was highest in mouse spleen and thymus by northern blot analysis. The cdc25M1 mRNA was detected in a number of cloned mouse lymphocyte cell lines including both CD8+ and CD4+ cells. cdc25M1 mRNA was shown to be cell cycle-regulated in T cells following interleukin-2 (IL-2)-stimulation. Accumulation of cdc25M1 mRNA occurred at 48 h after IL-2 stimulation, when lymphocytes were progressing from S phase to G2/M phase of the cell cycle. This pattern of expression is in contrast to that observed for other protein tyrosine phosphatases expressed in T lymphocytes including CD45, LRP, SHP, and PEP. The elevation in cdc25M1 mRNA level occurred concomittant to the appearance of the hyperphosphorylated form of p34cdc2 protein kinase. A purified, bacterial-expressed recombinant cdc25M1 phosphatase domain catalyzed the dephosphorylation of p-nitrophenol phosphate, as well as [32P-Tyr] and [32P-Ser/Thr]-containing substrates. Preincubation of p34cdc2 kinase with cdc25M1 activated its histone H1 kinase activity in vitro. These results suggest that cdc25M1 may be involved in regulating the proliferation of mouse T lymphocytes following cytokine stimulation, through its action on p34cdc2 kinase.