We examined whether SHP-1 can regulate the activation of membrane-bound guanylate cyclase GC-A by atrial natriuretic factor (ANF). Co-immunoprecipitation experiments indicated that SHP-1 associated with GC-A in an ANF-dependent manner. Transfection of SHP-1 into CHO and MCF-7 cells inhibited ANF-stimulated GC-A activity. GC-A contains two SHP-1 substrate consensus sequences (amino acids 816-821 and 1014-1020) in its catalytic domain (GC-c). Transfection studies showed that SHP-1 inhibited the activity of GC-c, indicating that SHP-1 interacts with the catalytic domain. Interestingly, substitution of Phe at Tyr 818 or Tyr 1017 on GC-c led to the loss of enzyme activity. Examination of the tyrosine phosphorylation state of GC-A reveals that GC-A is not dephosphorylated by SHP-1. Transfection of v-Src enhanced ANF-stimulated GC-A activity in MCF-7 cells, whereas inhibition of Src activity decreased it. Co-immunoprecipitation experiments indicate that transfection of SHP-1 disrupts the association of Src with GC-A. These results indicate that SHP-1 is a GC-A associated protein, and that SHP-1 inhibits the activity of GC-A at least partly by disrupting the association of Src with GC-A.