Tartrate-resistant acid phosphatase (TRAP) is an enzyme with unknown biological function. In human tissues, its expression is restricted to bone-resorbing osteoclasts and activated macrophages. Osteoclasts secrete TRAP to the circulation during bone resorption. Reduction of the enzyme's binuclear iron center is important in regulating its activity. The purple form of the enzyme is inactive and contains two ferric ions. Mild reduction activates it to a pink form containing one ferric and one ferrous ion. Instead, strong reduction removes the iron content, resulting in a colorless, inactive enzyme. We describe spontaneous activation of the purple form to the pink form upon incubation at +37 degrees C. Further incubation results in slow inactivation of the enzyme and color change to yellowish. The enzyme purified from osteoclasts is a mixture of the purple and pink forms, but the enzyme purified from serum represents the yellowish form. We suggest that the newly synthesized enzyme is purple and reduced in the cell to the functionally active pink form. After fulfilling its biological function in the cell, the enzyme is further reduced to the yellowish form and secreted into the circulation. In the serum, further reduction would dissociate the iron content. The enzymes from osteoclasts and macrophages had similar catalytic properties, both being active as a protein tyrosine phosphatase (PTPase). The acid phosphatase (AcP) and PTPase activities were similar, and the preferred AcP substrate, pNPP, was processed in the same active site as phosphotyrosine. Our results suggest that redox-regulated PTPase activity may be a major function of TRAP in vivo.