Natural killer (NK) cells express killer inhibitory receptors that mediate negative regulation of NK cell cytotoxicity upon binding to MHC class I molecules on target cells. Unrelated inhibitory receptors on B cells have recently been shown to function through recruitment of phosphotyrosine phosphatase 1C (PTP-1C). Here, we show that a human killer inhibitory receptor specific for HLA-C also recruits PTP-1C after phosphorylation induced either by the pharmacological agent phenylarsine oxide or by conjugation with target cells. This recruitment is mediated by the binding of specific cytoplasmic phosphotyrosine-containing sequences to PTP-1C. These results implicate PTP-1C as a cytosolic component of the negative signaling pathway through NK cell inhibitory receptors.