Transforming growth factor β (TGF-β) inhibits proliferation and promotes cell migration. In TGF-β-treated MCF10A mammary epithelial cells overexpressing HER2 and by chromatin immunoprecipitation, we identified novel Smad targets including protein tyrosine phosphatase receptor type kappa (PTPRK). TGF-β up-regulated PTPRK mRNA and RPTPκ (receptor type protein tyrosine phosphatase kappa, the protein product encoded by the PTPRK gene) protein in tumor and nontumor mammary cells; HER2 overexpression down-regulated its expression. RNA interference (RNAi) of PTPRK accelerated cell cycle progression, enhanced response to epidermal growth factor (EGF), and abrogated TGF-β-mediated antimitogenesis. Endogenous RPTPκ associated with EGF receptor and HER2, resulting in suppression of basal and ErbB ligand-induced proliferation and receptor phosphorylation. In MCF10A/HER2 cells, TGF-β enhanced cell motility, FAK phosphorylation, F-actin assembly, and focal adhesion formation and inhibited RhoA activity. These responses were abolished when RPTPκ was eliminated by RNA interference (RNAi). In cells expressing RPTPκ RNAi, phosphorylation of Src at Tyr527 was increased and (activating) phosphorylation of Src at Tyr416 was reduced. These data suggest that (i) RPTPκ positively regulates Src; (ii) HER2 signaling and TGF-β-induced RPTPκ converge at Src, providing an adequate input for activation of FAK and increased cell motility and adhesion; and (iii) RPTPκ is required for both the antiproliferative and the promigratory effects of TGF-β.