The SHP2 phosphatase plays a central role in a number of signaling pathways were it dephosphorylates various substrate proteins. Regulation of SHP2 activity is, in part, achieved by an intramolecular interaction between the PTP domain of the protein, which contains the catalytic site, and the N-SH2 domain leading to a “closed” protein conformation and autoinhibition. Accordingly, “opening” of the N-SH2 and PTP domains is required for the protein to become active. Binding of phosphopeptides to the N-SH2 domain is known to induce the opening event, while a number of gain-of-function (GOF) mutants, implicated in Noonan's Syndrome and childhood leukemias, are thought to facilitate opening. In the present study, a combination of computational and experimental methods are used to investigate the structural mechanism of opening of SHP2 and the impact of three GOF mutants, D61G, E76K, and N308D, on the opening mechanism. Calculated free energies of opening indicate that opening must be facilitated by effector molecules, possibly the protein substrates themselves, as the calculated free energies preclude spontaneous opening. Simulations of both wild type (WT) SHP2 and GOF mutants in the closed state indicate GOF activity to involve increased solvent exposure of selected residues, most notably Arg362, which in turn may enhance interactions of SHP2 with its substrate proteins and thereby aid opening. In addition, GOF mutations cause structural changes in the phosphopeptide-binding region of the N-SH2 domain leading to conformations that mimic the bound state. Such conformational changes are suggested to enhance binding of phosphopeptides and/or decrease interactions between the PTP and N-SH2 domains thereby facilitating opening. Experimental assays of the impact of effector molecules on SHP2 phosphatase activity against both small molecule and peptide substrates support the hypothesized mechanism of GOF mutant action. The present calculations also suggest a role for the C-SH2 domain of SHP2 in stabilizing the overall conformation of the protein in the open state, thereby aiding conformational switching between the open active and closed inactive states. Proteins 2011; © 2011 Wiley-Liss, Inc.