SHP2 is a ubiquitous tyrosine phosphatase involved in regulating both tumor and immune cell signaling. In this study, we discovered a novel immune modulatory function of SHP2. Targeting this protein with allosteric SHP2 inhibitors promoted anti-tumor immunity, including enhancing T cell cytotoxic function and immune-mediated tumor regression. Knockout of SHP2 using CRISPR/Cas9 gene editing showed that targeting SHP2 in cancer cells contributes to this immune response. Inhibition of SHP2 activity augmented tumor intrinsic IFN signaling resulting in enhanced chemoattractant cytokine release and cytotoxic T cell recruitment, as well as increased expression of MHC Class I and PD-L1 on the cancer cell surface. Furthermore, SHP2 inhibition diminished the differentiation and inhibitory function of immune suppressive myeloid cells in the tumor microenvironment. SHP2 inhibition enhanced responses to anti-PD-1 blockade in syngeneic mouse models. Overall, our study reveals novel functions of SHP2 in tumor immunity and proposes that targeting SHP2 is a promising strategy for cancer immunotherapy.