The crystal structure of the catalytic domain from the MAPK phosphatase Pyst1 (Pyst1-CD) has been determined at 2.35 A. The structure adopts a protein tyrosine phosphatase (PTPase) fold with a shallow active site that displays a distorted geometry in the absence of its substrate with some similarity to the dual-specificity phosphatase cdc25. Functional characterization of Pyst1-CD indicates it is sufficient to dephosphorylate activated ERK2 in vitro. Kinetic analysis of Pyst1 and Pyst1-CD using the substrate p-nitrophenyl phosphate (pNPP) reveals that both molecules undergo catalytic activation in the presence of recombinant inactive ERK2, switching from a low- to high-activity form. Mutation of Asp 262, located 5.5 A distal to the active site, demonstrates it is essential for catalysis in the high-activity ERK2-dependent conformation of Pyst1 but not for the low-activity ERK2-independent form, suggesting that ERK2 induces closure of the Asp 262 loop over the active site, thereby enhancing Pyst1 catalytic efficiency.