Reversible protein tyrosyl phosphorylation of cell surface receptors and downstream intracellular transducers is a major regulatory mechanism used to modulate cellular responses to extracellular stimuli, and its deregulation frequently drives aberrant cell proliferation, survival and/or differentiation. SHP-2 is a cytoplasmic Src-homology 2 domain-containing protein tyrosine phosphatase that plays an important role in intracellular signaling and is required during development and hematopoiesis. Germ-line missense mutations in PTPN11, the gene coding SHP-2, have been discovered as a major molecular event underlying Noonan syndrome, an autosomal dominant trait characterized by short stature, dysmorphic facies, and congenital heart defects, as well as in other closely related developmental disorders. More recently, a distinct class of missense mutations in the same gene has been identified to occur as a somatic event contributing to myeloid and lymphoid malignancies. This review focuses on the role of SHP-2 in signal transduction, development and hematopoiesis, and on the consequences of SHP-2 gain-of-function.