Contact inhibition, the inhibition of cell proliferation by tight cell-cell contact is a fundamental characteristic of normal cells. Using primary cultured hepatocytes, we investigated the mechanisms of contact inhibition that decrease the mitogenic activity of hepatocyte growth factor (HGF), focusing on the regulation of c-Met/HGF-receptor activation. In hepatocytes cultured at a sparse cell density, HGF stimulation induced prolonged c-Met tyrosine phosphorylation for over 5 h and a marked mitogenic response. In contrast, HGF stimulation induced transient c-Met tyrosine phosphorylation in less than 3 h and failed to induce mitogenic response in hepatocytes cultured at a confluent cell density. Treatment of the confluent cells with HGF plus orthovanadate, a broad spectrum protein tyrosine phosphatase inhibitor, however, prolonged c-Met tyrosine phosphorylation for over 5 h and permitted the subsequent mitogenic response. The mitogenic response to HGF was associated with duration of c-Met tyrosine phosphorylation even in the sparse cells. We found that the activity and expression of the protein tyrosine phosphatase, LAR increased following HGF-stimulation specifically in confluent hepatocytes and not in sparse hepatocytes. LAR and c-Met were associated, and purified LAR dephosphorylated tyrosine-phosphorylated c-Met in in vitro phosphatase reactions. Furthermore, antisense oligonucleotides specific for LAR mRNA suppressed the expression of LAR, allowed prolonged c-Met tyrosine phosphorylation, and led to acquisition of a mitogenic response in hepatocytes even under the confluent condition. Thus functional association of LAR and c-Met underlies the inhibition of c-Met-mediated mitogenic signaling through the dephosphorylation of c-Met, which specifically occurs under the confluent condition.