Protein Tyrosine Phosphatase Non-receptor type 22 (PTPN22) is encoded by a major autoimmunity gene and is a known inhibitor of T cell receptor (TCR) signaling and drug target for cancer immunotherapy. However, little is known about PTPN22 post-translational regulation. Here we characterize a phosphorylation site at Ser325 situated C-terminal to the catalytic domain of PTPN22, and its roles in altering protein function. In human T cells, Ser325 is phosphorylated by Glycogen Synthase Kinase-3 (GSK3) following TCR stimulation, which promotes its TCR-inhibitory activity. Signaling through the major TCR-dependent pathway under PTPN22 control was enhanced by CRISPR/Cas9 mediated suppression of Ser325 phosphorylation and inhibited by mimicking it via glutamic acid substitution. Global phospho-mass spectrometry showed Ser325 phosphorylation state alters downstream transcriptional activity through enrichment of Swi3p, Rsc8p and Moira (SWIRM) domain binding proteins, and next-generation sequencing (NGS) revealed it differentially regulates the expression of chemokines and T cell activation pathways. Moreover, in vitro kinetic data suggest the modulation of activity depends on a cellular context. Finally, we begin to address the structural and mechanistic basis for the influence of Ser325 phosphorylation on the protein's properties by Deuterium Exchange Mass Spectrometry (DX/MS) and Nuclear Magnetic Resonance (NMR) spectroscopy. In conclusion, this study explores the function of a novel phosphorylation site of PTPN22 that is involved in complex regulation of TCR signaling and provides details that might inform the future development of allosteric modulators of PTPN22. Significance statement The tyrosine phosphatase PTPN22 serves as a negative regulator in T cells, and its phosphorylation is a major regulatory process for controlling its function. Here, we uncovered a novel phosphorylation site at Ser325 on PTPN22 that allosterically regulates its activity leading to impaired TCR-dependent pathways. Biophysical methods identify multiple regions affected upon Ser325 phosphorylation, which can be the basis for future mechanistic studies of PTPN22 activators or inhibitors.