Tightly controlled termination of proliferation determines when oligodendrocyte progenitor cells (OPCs) can initiate differentiation and mature into myelin-forming cells. Protein-tyrosine phosphatase α (PTPα) promotes OPC differentiation, but its role in proliferation is unknown. Here we report that loss of PTPα enhanced in vitro proliferation and survival and decreased cell cycle exit and growth factor dependence of OPCs but not neural stem/progenitor cells. PTPα(-/-) mice have more oligodendrocyte lineage cells in embryonic forebrain and delayed OPC maturation. On the molecular level, PTPα-deficient mouse OPCs and rat CG4 cells have decreased Fyn and increased Ras, Cdc42, Rac1, and Rho activities, and reduced expression of the Cdk inhibitor p27Kip1. Moreover, Fyn was required to suppress Ras and Rho and for p27Kip1 accumulation, and Rho inhibition in PTPα-deficient cells restored expression of p27Kip1. We propose that PTPα-Fyn signaling negatively regulates OPC proliferation by down-regulating Ras and Rho, leading to p27Kip1 accumulation and cell cycle exit. Thus, PTPα acts in OPCs to limit self-renewal and facilitate differentiation.