The protein tyrosine phosphatase Src homology region 2 domain-containing phosphatase-1 (SHP-1) plays an important role in modulating glucose and lipid homeostasis. We previously suggested a potential role of SHP-1 in the regulation of peroxisome proliferator-activated receptor γ2 (PPARγ2) expression and activity but the mechanisms were unexplored. PPARγ2 is the master regulator of adipogenesis, but how its activity is regulated by tyrosine phosphorylation is largely unknown. Here, we found that SHP-1 binds to PPARγ2 primarily via its N-terminal SH2-domain. We confirmed the phosphorylation of PPARγ2 on tyrosine-residue 78 (Y78), which was reduced by SHP-1 in vitro resulting in decreased PPARγ2 stability. Loss of SHP-1 led to elevated, agonist-induced expression of the classical PPARγ2 targets and , concomitant with increased lipid content in cells expressing PPARγ2, an effect blunted by abrogation of PPARγ2 phosphorylation. Collectively, we discovered that SHP-1 affects the stability of PPARγ2 through dephosphorylation thereby influencing adipogenesis.