Sequence analysis of the genomes of the Leporipoxviruses myxoma virus and Shope fibroma virus (SFV) led to thediscovery of open reading frames homologous to the vaccinia H1L gene encoding a soluble protein phosphatase with dual tyrosine/serine specificity. These viral phosphatase genes were subsequently localized to the myxoma BamHI-I fragment and the SFV BamHI-M fragment, and the resulting encoded proteins were designated l1L and M1L, respectively. The localization and orientation of the myxoma l1L and SFV M1L open reading frames within the well conserved central core of the viral genomes closely mirror that of the Orthopoxviruses vaccinia virus and variola virus. The myxoma l1L and SFV M1L phosphatases each contain the conserved tyrosine phosphatase signature sequence motif, (I/V)HCXAGXXR(S/T)G, including the active site cysteine, found previously to be essential for phosphotyrosine dephosphorylation. The vaccinia H1L phosphatase was originally shown to have the ability to dephosphorylate phosphotyrosyl and phosphoseryl residues in vitro. To assess whether this is a common feature of poxvirus phosphatases, myxoma 11 L was expressed as a GST-fusion protein, purified, and shown to dephosphorylate substrates containing tyrosine and serine phosphorylated residues, in a similar fashion to vaccinia H1L. A myxoma l1L variant, in which the active site cysteine 110 was mutated to serine, was expressed in a parallel fashion to the wild-type l1L protein and found to be completely deficient in its ability to dephosphorylate both phosphotyrosine and phosphoserine amino acids. In an attempt to ascertain the biological requirement for the myxoma l1L phosphatase, we constructed a recombinant myxoma virus containing a disrupted l1L open reading frame. This l1L mutant virus was able to successfully propagate in tissue culture only in the presence of a wild-type complementing gene, and pure virus clones containing only the disrupted allele were not viable. Thus, we conclude that the myxoma l1L dual specificity phosphatase is an essential factor for virus viability.