PTP-S2 is a ubiquitously expressed nuclear protein tyrosine phosphatase which shows increased expression upon mitogenic stimulation in a variety of cells in vitro and in vivo. In order to understand the role of this enzyme in cell cycle progression, tetracycline-regulated HeLa clones expressing PTP-S2 were isolated and characterized. Tetracycline-controlled expression of PTP-S2 increased the rate of cell proliferation. An analysis of the distribution of cells in various phases of the cell cycle in an exponentially growing cell population showed that there was a large decrease in the percentage of cells in G1 phase in a PTP-S2-expressing population of cells compared to nonexpressing cells. This decrease in the percentage of cells in G1 was dependent on the level of PTP-S2 expression. There was a corresponding increase in the percentage of cells in G2/M but no significant increase in the percentage of cells in S phase. An analysis of the time course of cell cycle progression after release from double thymidine block showed that the duration of G1 phase was significantly shortened in cells induced to express exogenous PTP-S2. However, the duration of S phase was not significantly altered and the duration of G2 phase was increased to some extent. Induction of PTP-S2 expression was associated with an increase in c-Myc protein levels, although the c-Myc mRNA level was not changed. Our results suggest that overexpression of PTP-S2 promotes progression of cells through G1 to S phase and is associated with increased level of c-Myc protein through a posttranscriptional mechanism.