Drosophila Corkscrew protein and its vertebrate ortholog SHP-2 (now known as Ptpn11) positively modulate receptor tyrosine kinase (RTK) signaling during development, but how these tyrosine phosphatases promote tyrosine kinase signaling is not well understood. Sprouty proteins are tyrosine-phosphorylated RTK feedback inhibitors, but their regulation and mechanism of action are also poorly understood. Here, we show that Corkscrew/SHP-2 proteins control Sprouty phosphorylation and function. Genetic experiments demonstrate that Corkscrew/SHP-2 and Sprouty proteins have opposite effects on RTK-mediated developmental events in Drosophila and an RTK signaling process in cultured mammalian cells, and the genes display dose-sensitive genetic interactions. In cultured cells, inactivation of SHP-2 increases phosphorylation on the critical tyrosine of Sprouty 1. SHP-2 associates in a complex with Sprouty 1 in cultured cells and in vitro, and a purified SHP-2 protein dephosphorylates the critical tyrosine of Sprouty 1. Substrate-trapping forms of Corkscrew bind Sprouty in cultured Drosophila cells and the developing eye. These results identify Sprouty proteins as in vivo targets of Corkscrew/SHP-2 tyrosine phosphatases and show how Corkscrew/SHP-2 proteins can promote RTK signaling by inactivating a feedback inhibitor. We propose that this double-negative feedback circuit shapes the output profile of RTK signaling events.