Inappropriate activation of epidermal growth factor receptor (EGFR) plays a causal role in many cancers including colon cancer. The activation of EGFR by phosphorylation is balanced by receptor kinase and protein tyrosine phosphatase activities. However, the mechanisms of negative EGFR regulation by tyrosine phosphatases remain largely unexplored. Our previous results indicate that protein tyrosine phosphatase receptor type O (PTPRO) is down-regulated in a subset of colorectal cancer (CRC) patients with a poor prognosis. Here we identified PTPRO as a phosphatase that negatively regulates SRC by directly dephosphorylating Y416 phosphorylation site. SRC activation triggered by PTPRO down-regulation induces phosphorylation of both EGFR at Y845 and the c-CBL ubiquitin ligase at Y731. Increased EGFR phosphorylation at Y845 promotes its receptor activity, whereas enhanced phosphorylation of c-CBL triggers its degradation promoting EGFR stability. Importantly, hyperactivation of SRC/EGFR signaling triggered by loss of PTPRO leads to high resistance of colon cancer to EGFR inhibitors. Our results not only highlight the PTPRO contribution in negative regulation of SRC/EGFR signaling but also suggest that tumors with low PTPRO expression may be therapeutically targetable by anti-SRC therapies.