This report describes the identification and characterization of a novel cytoplasmic isoform of human protein tyrosine phosphatase epsilon (PTPε). The novel isoform, denoted cyt‐PTPεPD1, displays only the N‐terminal catalytic, active phosphatase domain 1 (PD1) which is common in all known PTPε isoforms. In addition, it contains a unique 132‐residue long C‐terminal end with no known motifs or homology to other characterized proteins. RNAse protection assay on isolated leucocyte subpopulations and selected cell lines demonstrated highest expression of cyt‐PTPεPD1 in monocytes. The mRNA‐encoding cyt‐PTPεPD1 is detected as distinct transcript(s) by Northern blot analysis and is a result of alternative splicing. cyt‐PTPεPD1 shows similar cellular localization in transfected cells, both in the cytoplasm and nucleus, as has been previously described for cytoplasmic PTPε isoform. Our previous data suggest that the expression of cytoplasmic PTPε inhibits the mitogen‐activated protein kinase cascade through the extracellular signal‐regulated kinase 1 and 2 pathway. A similar functional role is also presented here for cyt‐PTPεPD1, supporting our previous data suggesting that the catalytic first PD of PTPε is responsible for this inhibition.