Angiogenesis, the formation of new blood vessels from preexisting vasculature, occurs in a variety of physiological and pathological conditions. The process of angiogenesis is known to be regulated by vascular endothelial growth factor (VEGF) and its receptors (VEGFR‐2) in coordination with extracellular matrix interacting molecules such as integrins. Integrins have been reported to exhibit extracellular matrix dependent regulation of several tyrosine kinases on endothelial cell surfaces. In this study we have revealed the role of β3 integrin cytoplasmic tyrosine motifs in the regulation of protein tyrosine phosphatase (PTPs), associated with VEGFR‐2, in a tyrosine phosphorylation‐dependent manner. SHP‐2 association with VEGFR‐2 regulates the extent of basal and growth factor‐induced VEGFR‐2 phosphorylation in endothelial cells. Additionally, phosphorylated β3 integrin cytoplasmic tyrosine motifs provide binding sites for SHP‐2 and protect VEGFR‐2 from dephosphorylation. Moreover, DiYF endothelial cells, in which β3 integrin cytoplasmic tyrosine motifs are mutated to phenylalanine, exhibit deficient SHP‐2 binding to β3 integrin and VEGF stimulation, also display a modest decrease in SHP‐2 dissociation from VEGFR‐2 and decreased pathological angiogenesis in vivo. Further, we have also demonstrated that SHP‐2 binds to phosphorylated tyrosine residue 773 of the β3 cytoplasmic domain, and that β3 integrin cytoplasmic‐derived cell permeable prephosphorylated peptide 773Yp reduced VEGF‐induced VEGFR‐2 tyrosine phosphorylation and down stream signaling, endothelial cell migration, tube formation, ex vivo and in vivo angiogenesis. We have for the first time demonstrated this novel mechanism which regulates processes of VEGFR‐2 activation and pathological angiogenesis.