The T cell lineage-restricted protein THEMIS plays a critical role in T cell development at the positive selection stage. In the SHP1 activation model, THEMIS is proposed to enhance the activity of the tyrosine phosphatase SHP1 (encoded by Ptpn6), thereby dampening T cell antigen receptor (TCR) signaling and preventing the inappropriate negative selection of CD4+CD8+ thymocytes by positively selecting ligands. In contrast, in the SHP1 inhibition model, THEMIS is proposed to suppress SHP1 activity, rendering CD4+CD8+ thymocytes more sensitive to TCR signaling initiated by low-affinity ligands to promote positive selection. We sought to resolve the controversy regarding the molecular function of THEMIS. We found that the defect in positive selection in Themis-/- thymocytes was ameliorated by pharmacologic inhibition of SHP1 or by deletion of Ptpn6 and was exacerbated by SHP1 overexpression. Moreover, overexpression of SHP1 phenocopied the Themis-/- developmental defect, whereas deletion of Ptpn6, Ptpn11 (encoding SHP2), or both did not result in a phenotype resembling that of Themis deficiency. Last, we found that thymocyte negative selection was not enhanced but was instead impaired in the absence of THEMIS. Together, these results provide evidence favoring the SHP1 inhibition model, supporting a mechanism whereby THEMIS functions to enhance the sensitivity of CD4+CD8+ thymocytes to TCR signaling, enabling positive selection by low-affinity, self-ligand-TCR interactions.