Vaccinia H1-related phosphatase (VHR) is classified as a dual specificity phosphatase. Unlike typical dual specificity phosphatases, VHR lacks the MAPK-binding domain and shows poor activity against MAPKs. We found that EGF receptor (EGFR) was a direct substrate of VHR and that overexpression of VHR down-regulated EGFR phosphorylation, particularly at Tyr-992 residue. Expression of VHR inhibited the activation of phospholipase Cγ and protein kinase C, both downstream effectors of Tyr-992 phosphorylation of EGFR. Decreasing VHR expression by RNA interference caused higher EGFR phosphorylation at Tyr-992. In addition to EGFR, VHR also directly dephosphorylated ErbB2. Consistent with these results, suppression of VHR augmented the foci formation ability of H1299 non-small cell lung cancer (NSCLC) cells, whereas overexpression of VHR-suppressed cell growth in both two- and three-dimensional cultures. Expression of VHR also suppressed tumor formation in a mouse xenograft model. Furthermore, VHR expression was significantly lower in NSCLC tissues in comparison to that in normal lung tissues. Collectively, this study shows that down-regulation of VHR expression enhances the signaling of ErbB receptors and may be involved in NSCLC pathogenesis.