The angiopoietin (ANGPT)-TIE2/TEK signaling pathway is essential for blood and lymphatic vascular homeostasis. ANGPT1 is a potent TIE2 activator, whereas ANGPT2 functions as a context-dependent agonist/antagonist. In disease, ANGPT2-mediated inhibition of TIE2 in blood vessels is linked to vascular leak, inflammation, and metastasis. Using conditional knockout studies in mice, we show TIE2 is predominantly activated by ANGPT1 in the cardiovascular system and by ANGPT2 in the lymphatic vasculature. Mechanisms underlying opposing actions of ANGPT2 in blood vs. lymphatic endothelium are poorly understood. Here we show the endothelial-specific phosphatase VEPTP (vascular endothelial protein tyrosine phosphatase) determines TIE2 response to ANGPT2. VEPTP is absent from lymphatic endothelium in mouse in vivo, permitting ANGPT2/TIE2-mediated lymphangiogenesis. Inhibition of VEPTP converts ANGPT2 into a potent TIE2 activator in blood endothelium. Our data support a model whereby VEPTP functions as a rheostat to modulate ANGPT2 ligand effect on TIE2.