Platelet endothelial cell adhesion molecule-1 (PECAM-1; CD31) is a 130-kDa transmembrane glycoprotein that is expressed on the surfaces of platelets, endothelial cells, and certain leukocyte subsets. The extracellular region of PECAM-1 contains six immunoglobulin homology domains, two of which (domains 1 and 2) mediate PECAM-1 hemophilic interactions. Recent evidence suggests that a major function of the extracellular region of PECAM-1 is to determine its localization within the plane of the plasma membrane. The cytoplasmic domain of PECAM-1 contains an immunoreceptor tyrosine-based inhibitory motif that, upon tyrosine phosphorylation, supports recruitment of the Src homology 2 domain-containing protein tyrosine phosphatase, SHP-2, However, neither the targets of this PECAM-1/SHP-2 complex nor the significance of localizing SHP-2 to the borders of opposing PECAM-1-expressing cells is yet known. As a first step in addressing these issues, we designed a cDNA encoding a chimeric protein composed of the PECAM-1 extracellular domain fused to the phosphatase domain of SHP-2, which we call PECAM-1/SHP-2. When immunopurified from stably transfected HEK293 cell lines expressing this recombinant protein, PECAM-1/PhD2 was found to possess constitutive enzymatic activity and appropriate border localization. This constitutively active chimeric protein will be useful in future studies designed to define the components of signal transduction pathways modulated by PECAM-1/SHP-2 signaling complexes.