Striatal enriched protein tyrosine phosphatase (STEP) acts in the central nervous system to dephosphorylate a number of important proteins involved in synaptic function including ERK and NMDA receptor subunits. These proteins are also linked to stroke, in which cerebral ischemia triggers a complex cascade of events. Here we demonstrate that STEP is regulated at both the transcriptional and the post-transcriptional levels in rat models of cerebral ischemia and that its regulation may play a role in the outcome of ischemic insults. After transient middle cerebral artery occlusion, there are profound decreases in the levels of STEP mRNA, whilst in global ischemia STEP mRNA is selectively down-regulated in areas susceptible to ischemic damage. In a neuroprotective preconditioning paradigm, and in regions of the brain that are relatively resistant to ischemic damage, STEP mRNA levels are increased. Furthermore, there is a significant processing of STEP after ischemia to generate a novel species, STEP33, resulting in a redistribution of STEP from membrane-bound to soluble compartments. Concomitant with the cleavage of mature forms of STEP, there are changes in the phosphorylation state of ERK. We show that the cleavage of STEP leads to a catalytically active form, but this cleaved form no longer binds to and dephosphorylates its substrate pERK. Therefore, in response to ischemic insults, there are profound reductions in both the amount and the activity of STEP, its localization, as well as the activity of one of its key substrates, pERK. These changes in STEP may reflect a critical role in the outcomes of ischemic brain injury.