Paired immunoglobulin-like receptor B (PIR-B) (p91) molecule has been proposed to function as an inhibitory receptor in B cells and myeloid lineage cells. We demonstrate here that the cytoplasmic region of PIR-B is capable of inhibiting B cell activation. Mutational analysis of five cytoplasmic tyrosines indicate that tyrosine 771 in the motif VxYxxL plays the most crucial role in mediating the inhibitory signal. PIR-B-mediated inhibition was markedly reduced in the SH2-containing protein tyrosine phosphatases SHP- 1 and SHP-2 double-deficient DT40 B cells, whereas this inhibition was unaffected in the inositol polyphosphate 5'-phosphatase SHIP-deficient cells. These data demonstrate that PIR-B can negatively regulate B cell receptor activation and that this PIR-B-mediated inhibition requires redundant functions of SHP-1 and SHP-2.