The SH2-containing tyrosine phosphatase Shp2 (PTPN11) is required for normal growth factor and cytokine signaling. Germline Shp2 mutations cause ~50% of Noonan Syndrome (NS), which is associated with an increased risk of juvenile myelomonocytic leukemia (JMML). Somatic Shp2 mutations are found in ~35% of sporadic JMML, and at lower incidence in various chronic and acute leukemias. JMML patients without Shp2 mutations have either activating Ras mutations or homozygotic inactivation of Nf1. Nearly all disease-associated Shp2 mutations affect residues known to control catalytic activity. NS and leukemia mutations can involve the same residues, but when they do, the latter are less conservative, suggesting that they may be more activating. We previously showed that leukemia-associated mutants E76K or D61Y, but not wild type (WT) Shp2 could transform bone marrow (BM) or fetal liver cells and give rise to cytokine-independent myeloid colony formation. Leukemia-associated mutants yielded much higher number and larger size of colonies than NS-associated mutants (e.g., N308D, N308S, E76D) whereas, mutants associated with both NS and leukemia (T73I, E139D, Q506P) evoked intermediate numbers. Transplantation of E76K− or D61Y− (but not parental virus or WT Shp2) transduced BM into lethally irradiated recipients evoked a fatal JMML-like disorder. To understand the structural requirements of Shp2 for transformation, we made a series of second site mutations in Shp2 E76K and expressed these mutants in murine BM. Mutation of the canonical arginine residue to methionine in the FLVRES motif in either N-SH2 or C-SH2 domain of Shp2 E76K ablated myeloid transforming ability. Mutation of the conserved arginine residue within the Shp2 E76K phosphatase domain signature motif to methionine, which diminishes phosphatase activity, also eliminated myeloid transformation. Tyrosine residues 542 and 580 in the C-terminus of Shp2 are known to undergo phosphorylation in response to many growth factors and required for Grb2 binding. Mutation of tyrosine 542 to phenylalanine markedly reduced transformation, whereas tyrosine 580 mutation alone had little effect. However, mutation of both tyrosines eliminated Shp2 E76K-evoked transformation, suggesting that Grb2-binding to Shp2 could be important for transformation. We observed that Gab2, a major Shp2 SH2 domain binding protein, was absolutely required for transformation by Shp2 E76K but not activating RasV12. Gab3, another member of Gab family protein mainly expressed in hematopoietic cells, was not critical for Shp2 E76K-evoked transformation. We also found that Stat5 was important for Shp2 E76K-mediated transformation. Mast cells derived from E76K− and D61Y− transplanted mice BM exhibited increased proliferation and enhanced activation of Erk, p38MAPK, Akt and Stat5 in response to IL-3. These results provide some mechanistic insights into how Shp2 mutants could transform primary myeloid cells and result in JMML-like MPD.