RPTPmu is a receptor-like protein-tyrosine phosphatase (RPTP) whose ectodomain mediates homotypic cell-cell interactions. The intracellular part of RPTPmu contains a relatively long juxtamembrane domain (158 amino acids; aa) and two conserved phosphatase domains (C1 and C2). The membrane-proximal C1 domain is responsible for the catalytic activity of RPTPmu, whereas the membrane-distal C2 domain serves an unknown function. The regulation of RPTP activity remains poorly understood, although dimerization has been proposed as a general mechanism of inactivation. Using the yeast two-hybrid system, we find that the C1 domain binds to an N-terminal noncatalytic region in RPTPmu, termed JM (aa 803-955), consisting of a large part of the juxtamembrane domain (120 aa) and a small part of the C1 domain (33 aa). When co-expressed in COS cells, the JM polypeptide binds to both the C1 and the C2 domain. Strikingly, the isolated JM polypeptide fails to interact with either full-length RPTPmu or with truncated versions of RPTPmu that contain the JM region, consistent with the JM-C1 and JM-C2 interactions being intramolecular rather than intermolecular. Furthermore, we find that large part of the juxtamembrane domain (aa 814-922) is essential for C1 to be catalytically active. Our findings suggest a model in which RPTPmu activity is regulated by the juxtamembrane domain undergoing intramolecular interactions with both the C1 and C2 domain.