Transforming growth factor beta (TGF-beta) inhibits proliferation and promotes cell migration. In TGF-beta-treated MCF10A mammary epithelial cells overexpressing HER2 and by chromatin immunoprecipitation, we identified novel Smad targets including protein tyrosine phosphatase receptor type kappa (PTPRK). TGF-beta up-regulated PTPRK mRNA and RPTPkappa (receptor type protein tyrosine phosphatase kappa, the protein product encoded by the PTPRK gene) protein in tumor and nontumor mammary cells; HER2 overexpression down-regulated its expression. RNA interference (RNAi) of PTPRK accelerated cell cycle progression, enhanced response to epidermal growth factor (EGF), and abrogated TGF-beta-mediated antimitogenesis. Endogenous RPTPkappa associated with EGF receptor and HER2, resulting in suppression of basal and ErbB ligand-induced proliferation and receptor phosphorylation. In MCF10A/HER2 cells, TGF-beta enhanced cell motility, FAK phosphorylation, F-actin assembly, and focal adhesion formation and inhibited RhoA activity. These responses were abolished when RPTPkappa was eliminated by RNA interference (RNAi). In cells expressing RPTPkappa RNAi, phosphorylation of Src at Tyr527 was increased and (activating) phosphorylation of Src at Tyr416 was reduced. These data suggest that (i) RPTPkappa positively regulates Src; (ii) HER2 signaling and TGF-beta-induced RPTPkappa converge at Src, providing an adequate input for activation of FAK and increased cell motility and adhesion; and (iii) RPTPkappa is required for both the antiproliferative and the promigratory effects of TGF-beta.