A Saccharomyces cerevisiae Protein Tyrosine Phosphatase, PTP1, was expressed from an Escherichia coli expression system and milligram quantities of active PTP1 were purified chromatographically. The substrate specificity of the recombinant PTP1 was probed using synthetic phosphotyrosine-containing peptides corresponding to the regulatory phosphorylation sites of the yeast MAP kinase homologues $Fus3_{176-186}$, $Kss1_{179-189}$, and $Hog1_{170-180}$. Peptide sequences derived from the MAP kinase homologues were chosen arbitrarily as starting points for sequence variation studies even though they are not likely to be candidates for physiological substrates of PTP1. Phosphotyrosyl-$Hog1_{170-180}$ peptide showed a $K_M$ value of 877 ${mu}M$ and phosphorylated $Kss1_{179-189}$ and $Fus3_{176-186}$ peptides showed lower $K_M$ values of 74 ${mu}M$ and 51 ${mu}M$ each. To study the effect of sequence variations of the peptide, amino acids of the undecapeptide $Hog1_{170-180}$ (DPQMTGpYVSTR) were sequentially substituted by an alanine residue. More extensive variations of each amino acid revealed positional importance of each amino acid residue. Based on these results, we derived a peptide sequence (DADEpYDA) that is recognized by PTP1 with an affinity ($K_M$ is 4 ${mu}M$) significantly higher than that of the peptides derived from the phosphorylation sites of Fus3, Kss1, and Hog1.