T-Cell Protein Tyrosine Phosphatase (TCPTP, PTPN2) is a non-receptor type protein tyrosine phosphatase that is ubiquitously expressed in human cells. TCPTP is a critical component of a variety of key signaling pathways that are directly associated with the formation of cancer and inflammation. Thus, understanding the molecular mechanism of TCPTP activation and regulation is essential for the development of TCPTP therapeutics. Under basal conditions, TCPTP is largely inactive, although how this is achieved is poorly understood. By combining biomolecular nuclear magnetic resonance spectroscopy, small-angle X-ray scattering, and chemical cross-linking coupled with mass spectrometry, we show that the C-terminal intrinsically disordered tail of TCPTP functions as an intramolecular autoinhibitory element that controls the TCPTP catalytic activity. Activation of TCPTP is achieved by cellular competition, i.e., the intrinsically disordered cytosolic tail of Integrin-α1 displaces the TCPTP autoinhibitory tail, allowing for the full activation of TCPTP. This work not only defines the mechanism by which TCPTP is regulated but also reveals that the intrinsically disordered tails of two of the most closely related PTPs (PTP1B and TCPTP) autoregulate the activity of their cognate PTPs via completely different mechanisms.