Low molecular weight protein tyrosine phosphatase (LMW-PTP) was cloned from human lens epithelial B3 cells (HLE B3) and the recombinant enzyme was purified to homogeneity. The pure enzyme reacted positively with anti-LMW-PTP antibody, displayed tyrosine-specific phosphatase activity and was extremely sensitive to H2O2. The inactivated LMW-PTP could be regenerated by thioltransferase (TTase)/GSH system as demonstrated by both activity assay and by mass spectrometry (MS). The MS study also showed that an intramolecular disulfide bond was formed between C13 and C18 at the active site, and was reduced by the TTase/GSH system. The putative role of LMW-PTP in regulating platelet derived growth factor (PDGF)-stimulated cell signaling was demonstrated in wild type mouse lens epithelial cells (LEC) in which LMW-PTP was transiently inactivated, corroborated with the transient phosphorylation of Tyr857 at the active site of PDGF receptor and the downstream signaling components of Akt and ERK1/2. In contrast, LMW-PTP activity in PDGF-stimulated LEC from TTase −/− mice was progressively lost, concomitant with the high basal and sustained high phosphorylation levels at Tyr857, Akt and ERK1/2. We conclude that the reversible LMW-PTP activity regulated by ROS-mediated oxidation and TTase/GSH reduction is the likely mechanism of redox signaling in lens epithelial cells