Abstract: Src homology phosphotyrosyl phosphatase 2 (SHP2) is a protein tyrosine phosphatase encoded by PTPN11, which catalyzes the dephosphorylation of protein tyrosine. As a convergence node, SHP2 mediates multiple signaling pathways such as rat sarcoma (RAS)-rapidly accelerated fibrosarcoma (RAF)-mitogen-activated extracellular signal-regulated kinase (MEK)-extracellular regulated protein kinases (ERK), phosphatidylinositol 3-kinase (PI3K)-serine/threonine kinase (AKT), janus kinase (JAK)-signal transducer and activator of transcription (STAT) and programmed death-1 (PD-1)/programmed cell death-ligand 1 (PD-L1). It can not only regulate the growth and proliferation of tumor cells, but also mediate the immune escape of tumor cells by influencing the tumor microenvironment. Given its dual biological functions in tumor immune regulation, SHP2 is a promising target for cancer immunotherapy. To date, several SHP2 allosteric inhibitors have been advanced into clinical trials for tumor immunotherapy with single or combination therapeutic strategies. Additionally, SHP2 activators also showed therapeutic potential in the field of tumor immune modulation. In this paper, we reviewed the dual function of SHP2 in both tumor and immune cells. Besides, the challenges and prospects of SHP2 modulators in cancer immunotherapy were also briefly discussed, aiming to explore new horizon of SHP2 modulators for tumor immunotherapy.