Reactive oxygen species have been implicated both in the ageing process and in degenerative diseases, including arthritis and cancer. Bacteria adapt to the lethal effects of oxidants such as hydrogen peroxide by inducing the expression of protective stress genes. Analogous responses have been identified in human cells. For example, haem oxygenase is a major stress protein in human cells treated with oxidants, and reactive oxygen intermediates activate NF-kappa B, a transcriptional regulator of genes involved in inflammatory and acute-phase responses. We report here the isolation and characterization of a novel complementary DNA (CL100) corresponding to a messenger RNA that is highly inducible by oxidative stress and heat shock in human skin cells. The cDNA contains an open reading frame specifying a protein of M(r) 39.3K with the structural features of a non-receptor-type protein-tyrosine phosphatase and which has significant amino-acid sequence similarity to a Tyr/Ser-protein phosphatase encoded by the late gene H1 of vaccinia virus. The purified protein encoded by the CL100 open reading frame expressed in bacteria has intrinsic phosphatase activity. Given the relationship between the levels of protein-tyrosine phosphorylation, receptor activity, cellular proliferation and cell-cycle control, the induction of this gene may play an important regulatory role in the human cellular response to environmental stress.