Human JAK2 tyrosine kinase mediates signaling through numerous cytokine receptors. The JAK2 JH2 domain functions as a negative regulator and is presumed to be a catalytically inactive pseudokinase, but the mechanism(s) for its inhibition of JAK2 remains unknown. Mutations in JH2 lead to increased JAK2 activity, contributing to myeloproliferative neoplasms (MPNs). Here we show that JH2 is a dual-specificity protein kinase that phosphorylates two negative regulatory sites in JAK2: Ser523 and Tyr570. Inactivation of JH2 catalytic activity increased JAK2 basal activity and downstream signaling. Notably, different MPN mutations abrogated JH2 activity in cells, and in MPN (V617F) patient cells phosphorylation of Tyr570 was reduced, suggesting that loss of JH2 activity contributes to the pathogenesis of MPNs. These results identify the catalytic activity of JH2 as a previously unrecognized mechanism to control basal activity and signaling of JAK2.