Protein-tyrosyl phosphorylation, regulated by protein tyrosine kinases and protein tyrosine phosphatases (PTPs), is a key cellular control mechanism. Until recently, little was known about PTPs. However, the past two years have witnessed an explosion of information about PTP structure, regulation and function. Crystal structures of several PTPs have provided insights into enzymatic mechanisms and regulation and suggested the design of ‘substrate-trapping’ mutants. Candidate homophilic and heterophilic ligands for transmembrane PTPs have been identified, and roles for transmembrane PTPs in regulating cell—cell interactions have been suggested. Finally, progress has been made in understanding signaling by Src homology 2 domain containing PTPs and PTPs controlling yeast osmoregulatory pathways.