SHP-1 promoter hypermethylation has been studied in hematopoietic cells and observed only in various types of lymphoma and leukemia. This study reports a contrasting situation in normal epithelial tissues and an association with skin pathogenesis, particularly in psoriasis. We investigated several cell lines, five of them were epithelial and six were hematopoietic, white blood cells from normal, healthy donors, and normal microdissected epithelium of kidney, liver, breast, cervix, lung, prostate, bladder, and skin. Interestingly, promoter 2 hypermethylation was apparent in all epithelial cell lines and tissues. However, distinctive degrees of demethylation were noted in some skin samples. The methylation patterns of each cell line corresponded to their mRNA isoforms, in that isoforms I and II could not be detected with either promoter 1 or 2 hypermethylation, respectively. We further explored whether an enhanced degree of demethylation could be observed in various dermatopathology lesions. While the promoter 2 methylation levels of squamous cell cancers, eczemas, and normal skins were not different, a significant degree of demethylation can be observed in psoriasis (p<0.005). In addition, psoriasis displays a higher level of SHP-1 isoform II than normal skin (p<0.05). In conclusion, this study discovered an unprecedented role of SHP-1 methylation in tissue-specific expression and its alteration in a nonmalignant human disease besides the transcription inhibition in leukemia and lymphoma. Furthermore, the promoter demethylation may play an important role in skin pathogenesis by enhancing SHP-1 isoform II transcription in psoriatic skin lesions.