Juvenile myelomonocytic leukemia (JMML) is a lethal disease of young children characterized by pathologic overproduction of myelomonocytic cells. Mutations in PTPN11, which encodes protein tyrosine phosphatase, Shp-2, occur in 35% of JMML patients. We demonstrated that macrophage progenitors expressing activating PTPN11 mutants hyperproliferate in response to GM-CSF(Chan et al., Blood 105, 2005). Based on these findings and the the clinical phenotype of JMML, we hypothesized that in addition to inducing hyperproliferation, activating PTPN11 mutants promote commitment to the myelomonocytic lineage at the expense of other myeloid lineages. To test this hypothesis, we compared the ability of cells expressing either WT or mutant Shp-2 to undergo mast cell differentiation. WT and three mutant Shp-2 cDNAs (E76K, D61V, and D61Y, commonly observed in JMML patients) were subcloned into the retroviral vector pMIEG3 in tandem with EGFP. Murine bone marrow low density mononuclear cells (LDMNCs) or lineage depleted (lin-/lo) cells were transduced, sorted for EGFP positive cells, and cultured in IL-3-containing media commonly used for mast cell development. Morphologically, LDMNCs expressing the activating PTPN11 mutants demonstrated increased adherence to the tissue culture plate, suggestive of monocyte/macrophage differentiation. Phenotypic analysis using flow cytometry demonstrated a significantly higher level of Mac-1 and F4/80 on cells expressing the mutants (Mac-1: MIEG3 24.6+/−8.9, WT Shp-2 19.3+/−7.9, E76K 91.7+/−013, D61V 84.7+/−5, and D61Y 88.5+/−3, n=4, p<0.001 for E76K, D61Y, or D61V v. MIEG3 or WT Shp-2; F4/80: MIEG3 8+/−0.6, WT Shp-2 9.9+/−0.9, E76K 66.7+/−9.7, D61V 60.5+/−4, and D61Y 56.5+/−1.4, n=2, p≤0.03 for E76K, D61Y, or D61V v. MIEG3 or WT Shp-2). In contrast, a significantly lower level of c-kit was expressed on cells bearing the PTPN11 mutants (c-kit: MIEG3 65+/−12.6, WT Shp-2 74.8+/−9.3, E76K 18.6+/−8.1, D61V 26.8+/−8.2, D61Y 19.1+/−8.1, n=4, p≤0.05 for E76K, D61Y, or D61V v. MIEG3 or WT Shp-2. Statistics conducted using Students t test). To test more specifically whether activating PTPN11 mutants alter hematopoietic progenitor differentiation, lin-/lo cells were transduced with MIEG3, WT Shp-2, or D61Y. Similar to that observed with LDMNCs, lin-/lo cells expressing D61Y preferentially adhered to the tissue culture plate and expressed significantly higher levels of F4/80 and Mac-1 following culture in IL-3. These data suggest that activating PTPN11 mutants vary hematopoietic cell fate specification and imply alterations in hematopoietic lineage-specific transcription factor expression. PU.1 is required for both macrophage and mast cell differentiation while GATA-2 is dispensible for macrophage development. We predicted elevated PU.1 and reduced GATA-2 expression in cells bearing activating PTPN11 mutants, thus accounting for preferential macrophage differentiation. Using quantitative RT-PCR, a modest elevation of PU.1 expression was found in cells expressing the activating PTPN11 mutants. However, GATA-2 expression in cells bearing the activating PTPN11 mutants was only 5–10% of that in cells transduced with MIEG3 or WT Shp-2, suggesting that Shp-2 gain-of-function mutants alter signaling pathways such that GATA-2 expression is diminished and monocytic differentiation is permitted at the expense of mast cell development. These data imply that normalization of molecular aberrancies at the transcription factor level may provide novel therapeutic tactics for the improved treatment of JMML.