We identified 25 protein tyrosine phosphatases (PTPs) expressed in rat ovarian granulosa cells. Of these PTPs, the expression levels of at least PTP20, PTP-MEG1, PTPM, and PTPC significantly changed during the estrus cycle. We examined the cellular functions of PTP20 in granulosa cells by expressing the wild type, a catalytically inactive CS mutant in which Cys229 of PTP20 was changed to Ser, or a substrate-trapping DA mutant in which Asp197 was mutated to Ala, using an adenovirus vector. Overexpression of the wild type, but not of the CS mutant, induced retraction of the cell body with the extension of long, dendritic-like processes after stimulation with FSH (FSH), a critical factor for the survival and differentiation of these cells. In addition, cell adhesion to the substratum decreased in an FSH-dependent manner. Inhibiting Rho GTPase activity with C3 botulinum toxin caused similar morphological changes. The FSH-enhanced phosphotyrosine (p-Tyr) level of p190 RhoGAP was selectively reduced by the overexpressed wild-type, but not by mutated PTP20. Although p190 RhoGAP is tyrosine-phosphorylated by c-Src via the tyrosine kinase Pyk2, wild-type PTP20 had little effect on p-Tyr418 of c-Src and no effect on p-Tyr402 of Pyk2, which are required for the full c-Src activity and for interacting between Pyk2 and c-Src, respectively. The CS and DA mutants as well as the wild type reduced the formation of p190 RhoGAP-p120 RasGAP complexes. Confocal microscopy analysis revealed that PTP20 intracellularly colocalizes with p190 RhoGAP. These results demonstrate that PTP20 regulates the functions of granulosa cells in an FSH-dependent manner by dephosphorylating p190 RhoGAP and subsequently inducing reorganization of the actin cytoskeleton. Moreover, our data suggest that PTPs play significant roles in controlling the dynamics of ovarian functions.