The tyrosine kinase Fyn plays a key role in oligodendrocyte differentiation and myelination in the central nervous system, but the molecules responsible for regulating Fyn activation in these processes remain poorly defined. Here we show that receptor-like protein-tyrosine phosphatase alpha (PTPalpha) is an important positive regulator of Fyn activation and signaling that is required for the differentiation of oligodendrocyte progenitor cells (OPCs). PTPalpha is expressed in OPCs and is up-regulated during differentiation. We used two model systems to investigate the role of PTPalpha in OPC differentiation: the rat CG4 cell line where PTPalpha expression was silenced by small interfering RNA, and oligosphere-derived primary OPCs isolated from wild-type and PTPalpha-null mouse embryos. In both cell systems, the ablation of PTPalpha inhibited differentiation and morphological changes that accompany this process. Although Fyn was activated upon induction of differentiation, the level of activation was severely reduced in cells lacking PTPalpha, as was the activation of Fyn effector molecules focal adhesion kinase, Rac1, and Cdc42, and inactivation of Rho. Interestingly, another downstream effector of Fyn, p190RhoGAP, which is responsible for Rho inactivation during differentiation, was not affected by PTPalpha ablation. In vivo studies revealed defective myelination in the PTPalpha(-/-) mouse brain. Together, our findings demonstrate that PTPalpha is a critical regulator of Fyn activation and of specific Fyn signaling events during differentiation, and is essential for promoting OPC differentiation and central nervous system myelination.