Vascular endothelial protein tyrosine phosphatase (VE-PTP) influences endothelial barrier function by regulating the activation of tyrosine kinase receptor Tie2. We determined whether this action is linked to the development of atherosclerosis by examining the influence of arterial shear stress on VE-PTP, Tie2 activation, plasma leakage, and atherogenesis. We found that exposure to high average shear stress led to downstream polarization and endocytosis of VE-PTP accompanied by Tie2 activation at cell junctions. In aortic regions with disturbed flow, VE-PTP was not redistributed away from Tie2. Endothelial cells exposed to high shear stress had greater Tie2 activation and less macromolecular permeability than regions with disturbed flow. Deleting endothelial VE-PTP in VE-PTPiECKO mice increased Tie2 activation and reduced plasma leakage in atheroprone regions. ApoE-/- mice bred with VE-PTPiECKO mice had less plasma leakage and fewer atheromas on a high-fat diet. Pharmacologic inhibition of VE-PTP by AKB-9785 had similar anti-atherogenic effects. Together, the findings identify VE-PTP as a novel target for suppression of atherosclerosis.