Tyrosine phosphorylation, controlled by the coordinated actions of protein tyrosine phosphatases (PTPs) and kinases (PTKs), is a critical control mechanism for numerous physiological processes, including growth, differentiation, metabolism, cell cycle regulation and cytoskeletal function. Originally, PTKs were believed to be the key enzymes controlling the dynamic process of tyrosine phosphorylation in vivo, with a small number of PTPs playing largely housekeeping roles. Unexpected structural diversity within a large family of PTPs called this idea into question. Approximately 75 PTPs have been identified, including both receptor-like and nontransmembrane enzymes, with genome sequencing data predicting the existence of similar to 500 human PTPs. These enzymes are characterized by the presence of a conserved catalytic domain of similar to 240 residues, containing the unique signature motif, [I/V]HCxAGxxR[S/T]G that defines this enzyme family (see accompanying minireview by Denu et al., 1996 [this issue of Cell]), fused, at either the N- or C-terminal ends, to a variety of noncatalytic, regulatory sequences. Now, several studies have illustrated subtleties of regulation and diversity of function for the PTPs which at least match those of the PTKs. Furthermore, PTPs can have both positive and negative effects on cellular signaling. This minireview discusses selected recent examples in which insights have been gained into the physiological function of PTP family members.