Anti-self/tumor T cell function can be improved by increasing TCR-peptide MHC (pMHC) affinity within physiological limits, but paradoxically further increases (K_d < 1 μM) lead to drastic functional declines. Using human CD8⁺ T cells engineered with TCRs of incremental affinity for the tumor antigen HLA-A2/NY-ESO-1, we investigated the molecular mechanisms underlying this high-affinity–associated loss of function. As compared with cells expressing TCR affinities generating optimal function (K_d = 5 to 1 μM), those with supraphysiological affinity (K_d = 1 μM to 15 nM) showed impaired gene expression, signaling, and surface expression of activatory/costimulatory receptors. Preferential expression of the inhibitory receptor programmed cell death-1 (PD-1) was limited to T cells with the highest TCR affinity, correlating with full functional recovery upon PD-1 ligand 1 (PD-L1) blockade. In contrast, upregulation of the Src homology 2 domain-containing phosphatase 1 (SHP-1/PTPN6) was broad, with gradually enhanced expression in CD8⁺ T cells with increasing TCR affinities. Consequently, pharmacological inhibition of SHP-1 with sodium stibogluconate augmented the function of all engineered T cells, and this correlated with the TCR affinity–dependent levels of SHP-1. These data highlight an unexpected and global role of SHP-1 in regulating CD8⁺ T cell activation and responsiveness and support the development of therapies inhibiting protein tyrosine phosphatases to enhance T cell–mediated immunity.