Genetic analysis has enhanced our understanding of the biological roles of many protein tyrosine kinases (PTKs). More recently, studies utilizing both spontaneous mutants and mutants induced by homologous recombination techniques have begun to yield key insights into the role of specific protein tyrosine phosphatases (PTPs) and to suggest how PTKs and PTPs interact. Specific PTPs in Saccharomyces cerevesiae and Schizomyces pombe regulate MAP kinase pathways. Several Drosophila receptor PTPs control axonal targeting pathways, whereas the non-receptor PTP Corkscrew (Csw), plays an essential positive signaling role in multiple developmental pathways directed by receptor PTKs. The vertebrate homolog of Csw, SHP-2, also is required for growth factor signaling and normal development. Finally, very recent studies of other mammalian PTPs suggest that they have critical roles in processes as diverse as hematopoiesis and liver and pituitary development.