The mitogen-activated protein kinase phosphatase 3 (MKP3)-catalyzed hydrolysis of aryl phosphates in the absence and presence of extracellular signal-regulated kinase 2 (ERK2) was investigated in order to provide insights into the molecular basis of the ERK2-induced MKP3 activation. In the absence of ERK2, the MKP3-catalyzed hydrolysis of simple aryl phosphates does not display any dependence on pH, viscosity, and the nature of the leaving group. Increased catalytic activity and enhanced affinity for oxyanions are observed for MKP3 in the presence of ERK2. In addition, normal bell-shaped pH dependence on the reaction catalyzed by MKP3 is restored in the presence of ERK2. Collectively, these results suggest that the rate-limiting step in the absence of ERK2 for the MKP3 reaction corresponds to a substrate-induced conformational change in MKP3 involving active site rearrangement and general acid loop closure. The binding of ERK2 to the N-terminal domain of MKP3 facilitates the repositioning of active site residues and speeds up the loop closure in MKP3 such that chemistry becomes rate-limiting in the presence of ERK2. Remarkably, it is found that the extent of ERK2-induced MKP3 activation is substrate dependent, with smaller activation observed for bulkier substrates. Unlike simple aryl phosphates, the MKP3-catalyzed hydrolysis of bulky polycyclic substrates exhibits bell-shaped pH rate profiles in the absence of ERK2. Furthermore, it is found that glycerol can also activate the MKP3-catalyzed reaction, increase the affinity of MKP3 for oxyanion, and restore the bell-shaped pH rate profile for the MKP3-catalyzed reaction. Thus, the rate of repositioning of catalytic groups and the reorienting of the electrostatic environment in the MKP3 active site can be enhanced not only by ERK2 but also by high affinity substrates or by glycerol.