Abstract The cytoplasmic domain of the Fc gamma receptor IIB (FcγRIIB) can be successfully displayed on the surface of filamentous phage, and after phosphorylation in vitro, can interact specifically with the SH2 domains of SHP-2, a cytoplasmic tyrosine phosphatase. When full-length FcγRIIB is expressed on phage, however, this interaction is greatly compromised, illustrating that characteristics of the full-length sequence are not well tolerated by the phage display system. Many associations in cell physiology are driven by similar interactions involving small modular binding domains or ligands, and so a fragmented cDNA library will facilitate display of such domains free of sequences which compromise their expression. A fragmented leukocyte cDNA display library of 10 8 clones was constructed. This library was phosphorylated in vitro with fyn kinase and was selected against the tandem SH2 domains of SHP-2 in the search for additional ligands. A depletion strategy to remove non-specific clones was employed, using SHP-2 Sepharose, prior to in vitro phosphorylation and selection. This permitted the emergence of clones encoding the cytoplasmic domain of PECAM-1, another natural ligand for SHP-2. The importance of dual phosphorylation of tyrosine residues at positions 663 and 686 was confirmed in competition ELISA experiments using phosphorylated phage and synthetic peptides. Thus, phage display of fragmented cDNA libraries permits the identification and characterisation of phosphorylated ligands of modular binding domains based on their functional interaction.