Eph receptors are activated by the autophosphorylation of tyrosine residues upon the binding of their ligands, the ephrins; however, the protein tyrosine phosphatases (PTPs) responsible for the negative regulation of Eph receptors have not been elucidated. Here, we identified protein tyrosine phosphatase receptor type O (Ptpro) as a specific PTP that efficiently dephosphorylates both EphA and EphB receptors as substrates. Biochemical analyses revealed that Ptpro dephosphorylates a phosphotyrosine residue conserved in the juxtamembrane region, which is required for the activation and signal transmission of Eph receptors. Ptpro thus seems to moderate the amount of maximal activation of Eph receptors. Using the chick retinotectal projection system, we show that Ptpro controls the sensitivity of retinal axons to ephrins and thereby has a crucial role in the establishment of topographic projections. Our findings explain the molecular mechanism that determines the threshold of the response of Eph receptors to ephrins in vivo.