Abstract The SH2-containing inositol phosphatase-1 (SHIP-1) is a 5′ inositol phosphatase known to negatively regulate the product of phosphoinositide-3 kinase (PI3K), phosphatidylinositol-3.4,5-trisphosphate. SHIP-1 can be recruited to a large number of inhibitory receptors expressed on natural killer (NK) cells. However, its role in NK cell development, maturation, and functions is not well defined. In this study, we found that the absence of SHIP-1 results in a loss of peripheral NK cells. However, using chimeric mice we demonstrated that SHIP-1 expression is not required intrinsically for NK cell lineage development. In contrast, SHIP-1 is required cell autonomously for NK cell terminal differentiation. These findings reveal both a direct and indirect role for SHIP-1 at different NK cell development checkpoints. Notably, SHIP-1–deficient NK cells display an impaired ability to secrete IFN-γ during cytokine receptor–mediated responses, whereas immunoreceptor tyrosine–based activation motif containing receptor-mediated responses is not affected. Taken together, our results provide novel insights on how SHIP-1 participates in the development, maturation, and effector functions of NK cells.