One of the most important mechanisms of eukaryotic signalling is protein phosphorylation on tyrosine residues, which plays a pivotal role in development by regulating cell proliferation, differentiation and migration. Cellular phosphotyrosine (P.Tyr) levels are regulated by the antagonistic activities of the protein-tyrosine kinases (PTKs) and protein-tyrosine phosphatases (PTPs). We have good insight into the function of PTKs at the molecular level and into the role of PTK-mediated signalling in development. Intuitively, PTPs and PTKs are equally important in development. Over the past decade, much emphasis has been placed on elucidation of the function of PTPs, which has led to good insights into the mechanism of PTP-mediated dephosphorylation. Although still relatively little is known about the role of PTPs in cell signalling and development, evidence is now emerging that several PTPs are crucial for proper development. Here I will introduce PTP-mediated signalling and discuss recent findings regarding the function of PTPs in development.