The cyclic process of autophosphorylation of the C-terminal tyrosine cluster (YC) of a bacterial tyrosine kinase and its subsequent dephosphorylation following interactions with a counteracting tyrosine phosphatase regulates diverse physiological processes, including the biosynthesis and export of polysaccharides responsible for the formation of biofilms or virulence-determining capsules. We provide here the first detailed insight into this hitherto uncharacterized regulatory interaction at residue-specific resolution using Escherichia coli Wzc, a canonical bacterial tyrosine kinase, and its opposing tyrosine phosphatase, Wzb. The phosphatase Wzb utilizes a surface distal to the catalytic elements of the kinase, Wzc, to dock onto its catalytic domain (WzcCD). WzcCD binds in a largely YC-independent fashion near the Wzb catalytic site, inducing allosteric changes therein. YC dephosphorylation is proximity-mediated and reliant on the elevated concentration of phosphorylated YC near the Wzb active site resulting from WzcCD docking. Wzb principally recognizes the phosphate of its phosphotyrosine substrate and further stabilizes the tyrosine moiety through ring stacking interactions with a conserved active site tyrosine.