SH2-domain-containing inositol phosphatase 2 (SHIP2) belongs to a small family of phosphoinositide 5-phosphatases that help terminate intracellular signaling initiated by activated receptor tyrosine kinases. Mammalian SHIP2 is viewed primarily as an attenuator of insulin signaling and has become a prominent candidate target for therapeutic agents that are designed to augment insulin signaling. Despite this view, no signaling pathway has yet been demonstrated as being affected directly by SHIP2 function in vivo, and in vitro studies indicate that the protein may function in multiple signaling pathways. Here, we analyze the role of a SHIP2 family member in the early zebrafish embryo where developmental and gene expression defects can be used to assay specific signaling pathways. The zebrafish ship2a transcript is maternally supplied, and inhibiting the expression of its protein product results in the expansion of dorsal tissue fates at the expense of ventral ones. We show that the developmental defects are the result of perturbation of fibroblast growth factor (FGF) signaling in the early embryo. Loss of Ship2a leads to an increased and expanded expression of outputs of FGF-mediated signaling, including FGF-dependent gene expression and activated mitogen-activated protein kinase (MAPK) signaling. Our findings demonstrate that Ship2a attenuates the FGF signaling pathway in vivo and functions in the establishment of normal tissue patterning in the early embryo. We suggest that modulation of FGF signaling may be a principal function of SHIP2 in mammals.