The receptor-linked protein tyrosine phosphatases (RPTPs) are key regulators of cell-cell communication through the control of cellular phosphotyrosine levels. Most human RPTPs possess an extracellular receptor domain and tandem intracellular phosphatase domains: comprising an active membrane proximal (D1) domain and an inactive distal (D2) pseudophosphatase domain. Here we demonstrate that PTPRU is unique amongst the RPTPs in possessing two pseudophosphatase domains. The PTPRU-D1 displays no detectable catalytic activity against a range of phosphorylated substrates and we show that this is due to multiple structural rearrangements that destabilise the active site pocket and block the catalytic cysteine. Upon oxidation, this cysteine forms an intramolecular disulphide bond with a vicinal "backdoor" cysteine, a process thought to reversibly inactivate related phosphatases. Importantly, despite the absence of catalytic activity, PTPRU binds substrates of related phosphatases strongly suggesting that this pseudophosphatase functions in tyrosine phosphorylation by competing with active phosphatases for the binding of substrates.