Tyrosine phosphorylation is associated with polysaccharide synthesis in a number of Gram-positive and Gram-negative bacteria. In Streptococcus pneumoniae, CpsB, CpsC, and CpsD affect tyrosine phosphorylation and are critical for the production of a mature capsule in vitro. To characterize the interactions between these proteins and the phosphorylation event they modulate, cps2B, cps2C, and cps2D from the capsule type 2 S. pneumoniae D39 were cloned and expressed both individually and in combination in Escherichia coli. Cps2D purified from E. coli was not phosphorylated unless it was co-expressed with its cognate transmembrane domain, Cps2C. Purified phosphorylated Cps2D had tyrosine kinase activity and could phosphorylate both dephosphorylated Cps2D and an exogenous substrate (poly-Glu-Tyr) in the absence of ATP. Cps2B exhibited phosphatase activity against both purified phosphorylated Cps2D and p-nitrophenyl phosphate. An additional role for Cps2B as an inhibitor of Cps2D phosphorylation was demonstrated in both co-expression experiments in E. coli and in vitro experiments where it blocked the transphosphorylation of Cps2D even in the presence of the phosphatase inhibitor sodium orthovanadate. cps2C and cps2D deletion mutants in S. pneumoniae produced no detectable mature capsule during laboratory culture. Both were avirulent in systemic mouse infections and were unable to colonize the nasopharynx, suggesting that the failure to produce capsule was not dependent on the environment. Based on these results, we propose a model for capsule regulation where CpsB, CpsC, CpsD, and ATP form a stable complex that enhances capsule synthesis.