The Fc receptor-like protein 5 (FCRL5) on B cells has both an immunoreceptor tyrosine-based activation motif (ITAM)-like sequence and two consensus immunoreceptor tyrosine-based inhibitory motifs (ITIM) in its cytoplasmic region. To evaluate its signaling potential, we expressed constructs for chimeric molecules composed of the cytoplasmic region of FCRL5 and the extracellular and transmembrane regions of the IgG Fc receptor FcγRIIB in a B cell line lacking an endogenous Fc receptor. Coligation of this fusion protein with the B cell receptor (BCR) inhibited BCR-mediated calcium mobilization, intracellular tyrosine phosphorylation, and Erk kinase activation. Our mutational analysis indicated that, whereas tyrosines in both the inhibitory and activation motifs are phosphorylated after ligation, only those in ITIMs influence BCR-mediated signaling. This FCRL5 inhibitory effect was mediated through dual ITIM recruitment of the SH2-containing protein tyrosine phosphatase, SHP-1, which in turn dephosphorylates the ITAM-based tyrosines in BCR Igα/Igβ heterodimers. An FCRL5 inhibitory effect on BCR signaling was likewise demonstrable for primary B cells. Although its ligand is presently unknown, we conclude that FCRL5 has the functional potential to serve as an inhibitory coreceptor on mature B cells in humans. © 2007 by The National Academy of Sciences of the USA.