Studies included in this report describe establishing Neu-induced mammary tumor cell lines, which either do or do not express the protein tyrosine phosphatase epsilon (PTPe), for the purpose of identifying substrates of the phosphatase. These cells display altered morphology and altered growth and adhesion properties, supporting our previous results that PTPe plays an accessory role in Neu- and Ras- induced transformation of mammary epithelial cells. We provide evidence to show that phosphorylation of the key kinase Src is altered in tumor cells lacking PTPe; changes of this type have been shown to inactivate Src in other systems. We provide further evidence to show that altered Src phosphorylation is the result of lack of PTPe activity and not of other undetermined properties of PTPe-deficient tumor cells. In a study related to our previous demonstration that the delayed-rectifier, voltage-gated potassium channel Kv2. 1 is a physiological substrate of PTPe, we show here that tyrosine residue 124 is the site of phosphorylation of this channel by Src and of dephosphorylation by PTPe. As such, this study strongly supports this channel being regulated by the mutually-antagonistic activities of Src and PTPe.