Src homology 2 (SH2) domain-containing phosphatase 2 (SHP2) has important cellular functions in mediating signal transduction downstream of receptor tyrosine kinases and immune cell receptors. In T cells, SHP2 is a key regulator of signalling pathways downstream of the checkpoint receptor programmed cell death protein 1 (PD-1) that suppresses T cell activation, and of the T cell receptor (TCR) that promotes T cell activation. SHP2 contains two SH2 domains: the N-SH2 and C-SH2 domains. Here, we describe a new approach for the chemical targeting of SHP2 by developing a peptide inhibitor, containing a non-hydrolysable phosphotyrosine (pTyr) mimetic, which selectively binds to the C-SH2 domain of SHP2. We found that incorporation of the pTyr mimetic L-O-malonyltyrosine (L-OMT) displayed robust binding affinity to the C-SH2 domain, while the widely used pTyr mimetic phosphonodifluoromethyl phenylalanine (F2Pmp) abolished binding, showing that the use of pTyr mimetics for SH2 domains is case dependent. Our C-SH2 inhibitor peptide (CSIP) impedes SHP2 activation and inhibits SHP2 phosphatase activity in vitro. CSIP is stable, cell permeable and non-cytotoxic in a model T cell line (Jurkat), in which it displays cellular activity in modulating T cell activation. As such, CSIP is a powerful chemical tool to study SHP2, in particular the role of its C-SH2 domain, in cellular contexts. CSIP enriches the toolbox of inhibitors with different modes of action to study SHP2.