Receptor protein tyrosine phosphatase T (PTPRT/PTPrho) is frequently mutated in human cancers including colon, lung, gastric, and skin cancers. More than half of the identified tumor-derived mutations are located in the extracellular part of PTPrho. However, the functional significance of those extracellular domain mutations remains to be defined. Here we report that the extracellular domain of PTPrho mediates homophilic cell-cell aggregation. This homophilic interaction is very specific because PTPrho does not interact with its closest homologue, PTPmu, in a cell aggregation assay. We further showed that all five tumor-derived mutations located in the NH(2)-terminal MAM and immunoglobulin domains impair, to varying extents, their ability to form cell aggregates, indicating that those mutations are loss-of-function mutations. Our results suggest that PTPrho may play an important role in cell-cell adhesion and that mutational inactivation of this phosphatase could promote tumor migration and metastasis.