Protein tyrosine phosphatase alpha (PTPα) functions as an activator of Src by dephosphorylating Tyr527/530, a critical negative regulatory site. The increase of PTPα catalytic activity requires its phosphorylation at Ser180 and/or Ser204 and its dissociation from PTPα/Grb2 complex. Here, we show that epidermal growth factor (EGF) stimulation increases the ability of PTPα to activate Src by dephosphorylating Tyr530 in BT-20 and SKBR3 breast cancer cell lines. Treatment of these cells with EGF transiently decreased the association of PTPα with Grb2 and enhanced PTPα catalytic activity via Ser180 and Ser204 phosphorylation that was blocked by the protein kinase C delta (PKCδ) inhibitor rottlerin or knockdown of PKCδ by siRNA or by the overexpression of PTPαS180A/S204A mutant. PTPα siRNA blocked EGF-mediated Src activation in cancer cells and inhibited on colony formation, whereas control siRNA did not. These results suggested that PTPα links activation of epidermal growth factor receptor (EGFR) signaling with Src activation and may provide a novel therapeutic target for treatment of breast cancer.