A large number of inhibitory receptors recruit SHP1 and/or SHP2, tandem-SH2-containing phosphatases through phosphotyrosine-based motifs immunoreceptor tyrosine-based inhibitory motif (ITIM) and immunoreceptor tyrosine-based switch motif (ITSM). Despite the similarity, these receptors exhibit differential effector binding specificities, as exemplified by the immune checkpoint receptors PD-1 and BTLA, which preferentially recruit SHP2 and SHP1, respectively. The molecular basis by which structurally similar receptors discriminate SHP1 and SHP2 is unclear. Here, we provide evidence that human PD-1 and BTLA optimally bind to SHP1 and SHP2 via a bivalent, parallel mode that involves both SH2 domains of SHP1 or SHP2. PD-1 mainly uses its ITSM to prefer SHP2 over SHP1 via their C-terminal SH2 domains (cSH2): swapping SHP1-cSH2 with SHP2-cSH2 enabled PD-1:SHP1 association in T cells. In contrast, BTLA primarily utilizes its ITIM to prefer SHP1 over SHP2 via their N-terminal SH2 domains (nSH2). The ITIM of PD-1, however, appeared to be de-emphasized due to a glycine at pY+1 position. Substitution of this glycine with alanine, a residue conserved in BTLA and several SHP1-recruiting receptors, was sufficient to induce PD-1:SHP1 interaction in T cells. Finally, structural simulation and mutagenesis screening showed that SHP1 recruitment activity exhibits a bell-shaped dependence on the molecular volume of the pY+1 residue of ITIM. Collectively, we provide a molecular interpretation of the SHP1/SHP2-binding specificities of PD-1 and BTLA, with implications for the mechanisms of a large family of therapeutically relevant receptors.