Protein tyrosine phosphatases represent a new family of intracellular and receptor-linked enzymes. They are totally specific toward tyrosyl residues in proteins, and, with specific activities 10-1000-fold greater than those of the protein tyrosine kinases, they can be expected to tightly control the level of phosphotyrosine within the cell. Most transmembrane forms contain two conserved intracellular catalytic domains, as displayed by the leukocyte common antigen CD45, but highly variable external segments. Some are related to the neuronal cell adhesion molecules (NCAMs) or fasciclin II and others contain fibronectin III repeats; this suggests that these enzymes might be involved in cell-cell interaction. The intercellular enzymes appear to contain a highly conserved catalytic core linked to a regulatory segment. Deletion of the regulatory domain alters both substrate specificity and cellular localization. Likewise, overexpression of the full-length and truncated enzymes affects cell cycle progression and actin filament stability, respectively. The interplay between tyrosine kinases and phosphatases is considered. A hypothesis is presented suggesting that in some systems phosphatases might act synergistically with the kinases and elicit a physiological response, irrespective of the state of phosphorylation of the target protein.