We investigated the role of SHPS-1/SIRPalpha1 in IL-1beta- and TNFalpha-dependent signaling that leads to the activation of Erk 1/2 and Akt. Treatment of Balb3T3 cells with IL-1beta or TNFalpha activated tyrosine phosphorylation of SHPS-1, its association with SHP-2 and the phosphorylation of Erk 1/2 and Akt. PP1, a specific inhibitor for the Src family protein tyrosine kinases, strongly inhibited tyrosine phosphorylation of SHPS-1 and complex formation of SHPS-1 with SHP-2 by IL-1beta. In addition, PP1 substantially inhibited the IL-2beta- and TNFalpha-dependent activation of Erk 1/2 and Akt. Exogenous expression of either SHPS-1 mutants that lack SHP-2 binding function or a dominant negative mutant of SHP-2 markedly inhibited the activation of Erk 1/2 and Akt by IL-1beta, whereas wild type SHPS-1 did not. Moreover, IL-1beta-stimulation induced association of SHPS-1 with IL-1RAcP, a second subunit of IL-1 receptor, whereas expression of SHPS-1 mutant that lack SHP-2 binding function clearly blocked the association and tyrosine phosphorylation of endogenous SHPS-1. Taken together, our results strongly suggest that activation of Erk 1/2 and Akt by proinflammatory cytokines requires tyrosine phosphorylation of SHPS-1 and subsequent association of SHPS-1 with SHP-2.