In the context of fibroblast growth factor (FGF) signaling, Sprouty2 (Spry2) is the most profound inhibitor of the Ras/ERK pathway as compared with other Spry isoforms. An exclusive, necessary, but cryptic PXXPXR motif in the C terminus of Spry2 is revealed upon stimulation. The activation of Spry2 appears to be linked to sequences in the N-terminal half of the protein and correlated with a bandshifting seen on SDS-PAGE. The bandshifting is likely caused by changes in the phosphorylation status of key Ser and Thr residues following receptor stimulation. Dephosphorylation of at least two conserved Ser residues (Ser112 and Ser-115) within a conserved Ser/Thr sequence is accomplished upon stimulation by a phosphatase that binds to Spry2 around residues 50-60. We show that human Spry2 coimmunoprecipitates with both the catalytic and the regulatory subunits of protein phosphatase 2A (PP2A-C and PP2A-A, respectively) in cells upon FGF receptor (FGFR) activation. PP2A-A binds directly to Spry2, but not to Spry2 Delta 50 - 60 (Delta 50-60), and the activity of PP2A increases with both FGF treatment and FGFR1 overexpression. c-Cb1 and PP2A-A compete for binding centered around Tyr-55 on Spry2. We show that there are at least two distinct pools of Spry2, one that binds PP2A and another that binds c-Cb1. c-Cb1 binding likely targets Spry2 for ubiquitin-linked destruction, whereas the phosphatase binding and activity are necessary to dephosphorylate specific Ser/Thr residues. The resulting change in tertiary structure enables the Pro-rich motif to be revealed with subsequent binding of Grb2, a necessary step for Spry2 to act as a Ras/ERK pathway inhibitor in FGF signaling.