SHP-2 is a ubiquitously expressed non-transmembrane tyrosine phosphatase with two SH2 domains. Multiple reverse-genetic studies have indicated that SHP-2 is a required component for organ and animal development. SHP-2 wild-type and homozygous mutant mouse fibroblast cells in which the N-terminal SH2 domain was target-deleted were used to examine the function of SHP-2 in regulating Phosphatidylinositol 3-Kinase (PI3K) activation by growth factors. In addition, SHP-2 and various mutants were introduced into human glioblastoma cells as well as SHP-2(-/-) mouse fibroblasts. We found that EGF stimulation and EGFR oncoprotein (DeltaEGFR) expression independently induced the co-immunoprecipitation of the p85 subunit of PI3K with SHP-2. Targeted deletion of the N-terminal SH2 domain of SHP-2 severely impaired PDGF- and IGF-induced Akt phosphorylation. Ectopic expression of SHP-2 in U87MG gliobastoma cells elevated EGF-induced Akt phosphorylation, and the effect was abolished by mutation of its N-terminal SH2 domain. Likewise, the reconstitution of SHP-2 expression in the SHP-2(-/-) cells enhanced Akt phosphorylation induced by EGF while rescuing that induced by PDGF and IGF. Further lipid kinase activity assays confirmed that SHP-2 modulation of Akt phosphorylation correlated with its regulation of PI3K activation. Based on these results, we conclude that SHP-2 is required for mediating PI3K/Akt activation, and the N-terminal SH2 domain is critically important for a "positive" role of SHP-2 in regulating PI3K pathway activation.