Covalent modification experiments were conducted in order to identify active site residues of the 18-kDa cytoplasmic phosphotyrosyl protein phosphatases. The enzyme was inactivated by diethyl pyrocarbonate, phenylglyoxal, cyclohexanedione, iodoacetate, iodoacetamide, phenylarsine oxide, and certain epoxides in a manner consistent with the modification of active site residues. Phenylglyoxal and cyclohexanedione both bind to the active site in a rapid preequilibrium process and thus act as active site-directed inhibitors. The pH dependencies of the inactivation by iodoacetate and by iodoacetamide were examined in detail and compared with rate data for the alkylation of glutathione as a model compound. The enzyme inactivation data permitted the determination of pKa values of two reactive cysteines at or near the active site. Although phosphomycin is simply a competitive inhibitor of the enzyme, it was found that 1,2-epoxy-3-(p-nitrophenoxy)propane (EPNP) and (R)- and (S)-benzylglycidol act as irreversible covalent inactivators, consistent with the importance of a hydrophobic moiety on the substrate in controlling substrate specificity. EPNP exhibits characteristics of an active site-directed inactivator, with a preequilibrium binding constant somewhat smaller than that of phosphate ion. The pH dependencies of inactivation of EPNP and (S)-benzylglycidol are identical to that observed for iodoacetamide and similar to that for iodoacetate, suggesting that they modify similar groups. Sequencing of the tryptic digests of the EPNP-labeled enzyme indicates that Cys-62 and Cys-145 are labeled. Phenylarsine oxide acts as a very slow, tight-binding inhibitor of the enzyme. The results are interpreted in terms of an active site model that incorporates a histidine-cysteine ion pair, similar to that present in papain.