Platelet endothelial cell adhesion molecule-1 (PECAM-1, CD31) functions to control the activation and survival of the cells on which it is expressed. Many of the regulatory functions of PECAM-1 are dependent on its tyrosine phosphorylation and subsequent recruitment of the Src homology (SH2) domain containing protein tyrosine phosphatase SHP-2. The recent demonstration that PECAM-1 tyrosine phosphorylation occurs in cells exposed to the reactive oxygen species hydrogen peroxide (H2O2) suggested that this form of oxidative stress may also support PECAM-1/SHP-2 complex formation. In the present study, we show that PECAM-1 tyrosine phosphorylation in response to exposure of cells to H2O2 is reversible, involves a shift in the balance between kinase and phosphatase activities, and supports binding of SHP-2 and recruitment of this phosphatase to cell-cell borders. We speculate, however, that the unique ability of H2O2 to reversibly oxidize the reactive site cysteine residues of protein tyrosine phosphatases may result in transient inactivation of the SHP-2 that is bound to PECAM-1 under these conditions. Finally, we provide evidence that PECAM-1 tyrosine phosphorylation and SHP-2 binding in endothelial cells requires exposure to an "oxidative burst" of H2O2, but that exposure of these cells to sufficiently high concentrations of H2O2 for a sufficiently long period of time abrogates binding of SHP-2 to tyrosine-phosphorylated PECAM-1. These findings support a role for PECAM-1 as a sensor of oxidative stress, perhaps most importantly during the process of inflammation.