Abstract Background: SHP1 is a member of the src homology 2 (SH2) domain-containing protein phosphatases. It contains two SH2 domains at the N-terminus, a catalytic domain and a C-terminal tail. SHP1 is primarily expressed in hematopoietic cells and commonly recognized as a negative regulator of multiple signaling pathways. It has been known that SHP1 interacts with proteins of the inhibitory-receptor superfamily containing immunoreceptor tyrosine-based inhibitory motifs. Methods: To screen for SHP1 allosteric inhibitors, we employed a DiFMUP high-throughput biochemical assay system. Compounds that only perturbed the activity of SHP1 was further optimized for cellular activity on target, in vitro ADME, and in vivo pharmacokinetic properties. X-ray crystallography has been introduced to determine the interaction between the inhibitor and the allosteric site of SHP1. We also evaluated the lead series in in-vitro studies with human primary immune cells and in-vivo efficacy studies in syngeneic mouse models. Results: We discovered a series of SHP1 allosteric inhibitors with IC50 values at the nanomolar level and high selectivity over the other PTP enzymes, including SHP2. Structurally, SHP1 adopts an autoinhibited conformation in its basal state, where the N-SH2 domain interacts with the PTP domain and blocks access to the catalytic site. X-ray crystallography reveals that our SHP1 inhibitors are bound to non-catalytic sites of the SHP1 inactive conformation. Among the compounds, SB6299 demonstrated potent cytokine responses in various human primary immune cell types. SB6299 significantly enhanced IL-2, IFN-γ, and TNF-α productions in human primary pan-T, NK, and monocyte cells, respectively. The cytokine release was confirmed as a result of selective SHP1 inhibition through the evaluation of SHP1 knockout in primary immune cells. Moreover, SB6299 showed dose responses in costimulatory molecules and cytokines (TNF-α and IL6) in human monocyte derived dendritic cells (DCs) and enhanced DC maturation markers such as CD80, CD86, and CD40. The anti-tumor efficacy of SB6299 was evaluated in the CT26 and MC38 syngeneic mouse models. Orally administered SB6299 showed tumor growth inhibition as a single agent, and the efficacy was further enhanced when administered in combination with an anti-PD1 antibody. Conclusions: 1. Our studies successfully demonstrate that SHP1 can be allosterically inhibited, allowing selectivity with other phosphatases, including SHP2. 2. SB6299 is the first-in-class orally available, potent, and selective SHP1 allosteric inhibitor. 3. Attenuation of SHP1 activity by SB6299 could promote cytokine secretion and cytotoxic effects in human primary immune cells. 4. Orally administered SB6299 induced tumor growth inhibition as a single agent and in combination with an anti-PD1 antibody. 5. Currently, more selective and potent inhibitors are being tested. Citation Format: Jun Gyu Kim, Ki Moon Ryu, Mi Yeon Jang, Jongho Cho, Dajeong Kim, Dae Hyeon Seong, Kyu Hwan Kim, Ik-Soo Jang, Jeong Yoon Shin, Hong Sik Han, Joon Yonug Hwang, Dae Young Lee, Chae Lim Ryu, Song Yi Lee, Tae-Dong Han, SeungMin Yang, Hyounmie Doh. A first-in-class and highly selective SHP1 allosteric inhibitor exhibits robust anti-tumor immunity and synergizes with PD-1 blockade [abstract]. In: Proceedings of the AACR-NCI-EORTC Virtual International Conference on Molecular Targets and Cancer Therapeutics; 2023 Oct 11-15; Boston, MA. Philadelphia (PA): AACR; Mol Cancer Ther 2023;22(12 Suppl):Abstract nr C075.