Previous studies of the developing nervous system have shown that cell- cell and cell-matrix interactions are involved in a variety of processes such as the proliferation, migration, and differentiation of neurons. While many cell-surface molecules have been identified, the signal transduction mechanisms through which they modify cellular responses are poorly understood. Recent studies have described a new and large family of enzymes, protein tyrosine phosphatases (PTPases), that may play a key role in transduction of cell surface events. Opposing the actions of protein tyrosine kinases (PTKs), PTPases can determine the state of tyrosine phosphorylation of a protein and regulate its function. Within the family of PTPases, two subgroups have been characterized: low-molecular-weight cytoplasmic (nonreceptor) PTPases and high-molecular-weight transmembrane (receptor) PTPases. Many receptor PTPases have fibronectin type III and/or Ig-like domains in their extracellular domains, suggesting that they have dual functions: cell adhesion and signal transduction. Such molecules may play a role in cellular recognition events that mediate the accurate assembly of the nervous system. Using polymerase chain reaction with degenerate primers and a neonatal rat cortex cDNA library, we have identified a number of putative PTPase domains expressed in brain. Three are characterized here. These three sequences are most abundantly expressed in the developing cortex and so are named cortex-enriched protein tyrosine phosphatases (CPTPs) 1, 2, and 3. CPTP1 and CPTP3 show sequence homology to receptor PTPases and detect multiple high- molecular-weight mRNAs that are expressed preferentially in the developing CNS. Analysis of a longer cDNA indicates that CPTP1 and CPTP3 are the first and second phosphatase domains of a single receptor PTPase. CPTP2 identifies a single, smaller mRNA species with sequence homology to nonreceptor PTPases. Within the CNS, mRNAs detected by all three CPTPs are expressed at highest levels during prenatal and early postnatal days and are downregulated in the adult. In situ hybridization demonstrates that the CPTPs are expressed by progenitor cells and developing neurons. The spatial and temporal regulation of CPTPs suggests that they may play a role in neuronal development.