Low M(r) phosphotyrosine protein phosphatase interferes in vivo with the activation of several growth factor receptors and is transiently redistributed, following cell stimulation with platelet-derived growth factor, from the cytosol to the cytoskeleton. We demonstrate here that this phosphatase also participates in the regulation of cell spreading and migration, pointing to its involvement in cytoskeleton organization. Low M(r) phosphotyrosine protein phosphatase-overexpressing fibroblasts are, indeed, less spread than controls and display a significantly decreased number of focal adhesions and increased cell motility. Furthermore, p125 focal adhesion kinase is associated to, and dephosphorylated by, low M(r) phosphotyrosine protein phosphatase both in vitro and in vivo. This event is consistent with an altered association of pp60(src) with focal adhesion kinase. The activation of extracellular signal-regulated kinase, another well known event downstream of the focal adhesion kinase, is also affected. On the other hand, cells overexpressing the dominant-negative form of low M(r) phosphotyrosine protein phosphatase exhibit hyperphosphorylated focal adhesion kinase, reduced motility, and an increased number of focal adhesions, which are distributed all over the ventral cell surface. Taken together, the results reported here are in keeping with low M(r) phosphotyrosine protein phosphatase participation in FAK-mediated focal adhesion remodeling.