SHP-1, a haematopoietic cell-specific tyrosine phosphatase, is also expressed in human prostate. In this study, we report that SHP-1 depletion in PC-3 cells induced by small interfering RNAs causes G1 phase cell-cycle arrest accompanied by changes in some components of the cell-cycle machinery. SHP-1 knockdown increases p27(Kip1) (p27) protein stability, its nuclear localization and p27 gene transcription. These effects could be mediated by PI3K-AKT pathway as SHP-1 interacts with PI3K regulating its activity and p110 catalytic subunit phosphorylation. The increase in p27 protein stability could also because of reduced cyclin-dependent kinase (CDK2) activity. SHP-1 knockdown decreases the CDK6 levels, inducing retinoblastoma protein hypophosphorylation, downregulation of cyclin E and thereby a decrease in the CDK2 activity. However, the codepletion of SHP-1 and p27 does not produce re-entry into the cycle, implying that p27 is not required to maintain cell-cycle arrest induced by SHP-1 depletion. The maintenance of the PC-3 cell anti-proliferative response after p27 loss could be because of mislocalization of CDK2 induced by SHP-1 knockdown. This study shows that SHP-1 depletion promotes cell-cycle arrest by modulating the activity of cell-cycle regulators and suggests that SHP-1 may be required for the proper functioning of events governing cell-cycle progression.