Activation of host phosphotyrosine phosphatase SHP-1 by Leishmania and its subsequent impact on tyrosine phosphorylation-based signaling cascades were shown to represent an important mechanism whereby this pathogen may alter host cell functions. Herein, we report that Leishmania-induced macrophage SHP-1 activity is necessary for its survival within phagocytes through the attenuation of nitric oxide-dependent and -independent microbicidal mechanisms. In vivo, Leishmania major infection, which footpad inflammation is mostly undetectable in SHP-1-deficient viable motheaten mice, was accompanied by increased inducible nitric oxide synthase and activation of neutrophils. These enhanced cellular activities were paralleled by a marked activation of signaling events usually negatively regulated by SHP-1. Overall, this study firmly establishes that modulation of the signaling terminator SHP-1 by Leishmania is essential for its installment and propagation.