Gp91phox is a component of the membrane bound, catalytic unit of the phagocyte respiratory burst oxidase. Transcription of the CYBB gene, which encodes gp91phox, is restricted to phagocytes that have differentiated beyond the promyelocyte stage. Transcription continues in mature myeloid cells until cell death and is increased by inflammatory mediators such as LPS or interferon gamma as part of the system of host defense. Previously, we determined that a negative cis element in the CYBB promoter binds a multi-protein complex in undifferentiated myeloid cells which includes the homeodomain proteins HoxA10 and Pbx1, and the histone deacetylase HDAC2. During cytokine induced differentiation, binding of this complex decreases, permitting binding of positive trans factors which activate an adjacent cis element in the CYBB promoter. In previous studies, we also determined that tyrosine phosphorylation decreases HoxA10 binding affinity for the CYBB repressor element. We found that HoxA10 is tyrosine phosphorylated in response to treatment of myeloid progenitor cells and myeloid cell lines with hematopoietic cytokines such as G-CSF, M-CSF and interferon gamma. In undifferentiated myeloid cells, HoxA10 is maintained in a non-tyrosine phosphorylated state by the protein tyrosine phosphatases SHP1 and SHP2. We find that activity of these PTPs decreases during myeloid differentiation. This decrease in PTP activity contributes to increased HoxA10 tyrosine phosphorylation, resulting in CYBB gene transcription as differentiation proceeds. Recently, leukemia associated, activating mutations of SHP2-PTP have been described in human subjects with Juvenile Chronic Myelomonocytic Leukemia (JMMoL), AML and MDS. These SHP2 mutations induce a conformational change which unmasks the PTP domain, resulting in constitutive activation. In these studies, we find that expression of one such leukemia associated SHP2-mutant impairs HoxA10 tyrosine phosphorylation during myelopoiesis. This results in sustained repression of CYBB transcription and decreased gp91phox expression in differentiating cells. Since gp91phox is one of the rate limiting oxidase component proteins during myeloid differentiation and the inflammatory response, activating mutants of SHP2-PTP would therefore be expected to impair respiratory burst competence in malignant myeloid cells. This could contribute to immuno-deficiency in some forms of myeloid malignancy where differentiation appears histologically preserved, such as JMMoL or MDS. Further investigation of the role of SHP2-mutation in phagocyte functional competence may identify rationale molecular targets to ameliorate immuno-deficiency in chronic myeloid diseases.