Insulin-like growth factor (IGF) binding protein 2 functions coordinately with receptor protein tyrosine phosphatase beta and the IGF-I receptor to regulate IGF-I-stimulated signaling.Insulin-like growth factor I (IGF-I) is a mitogen for vascular smooth muscle cells (VSMC) and has been implicated in the development and progression of atherosclerosis. IGF binding proteins (IGFBPs) modify IGF-I actions independently of IGF binding, but a receptor-based mechanism by which they function has not been elucidated. We investigated the role of IGFBP-2 and receptor protein tyrosine phosphatase beta (RPTPbeta) in regulating IGF-I signaling and cellular proliferation. IGFBP-2 bound RPTPbeta, which led to its dimerization and inactivation. This enhanced PTEN tyrosine phosphorylation and inhibited PTEN activity. Utilization of substrate trapping and phosphatase-dead mutants showed that RPTPbeta bound specifically to PTEN and dephosphorylated it. IGFBP-2 knockdown led to decreased PTEN tyrosine phosphorylation and decreased AKT Ser473 activation. IGFBP-2 enhanced IGF-I-stimulated VSMC migration and proliferation. Analysis of aortas obtained from IGFBP-2(-/-) mice showed that RPTPbeta was activated, and this was associated with inhibition of IGF-I stimulated AKT Ser473 phosphorylation and VSMC proliferation. These changes were rescued following administration of IGFBP-2. These findings present a novel mechanism for coordinate regulation of IGFBP-2 and IGF-I signaling functions that lead to stimulation of VSMC proliferation. The results have important implications for understanding how IGFBPs modulate the cellular response to IGF-I.