During neuronal development, cells respond to a variety of environmental cues through cell surface receptors that are coupled to a signaling transduction machinery based on protein tyrosine phosphorylation and dephosphorylation. Receptor and non-receptor tyrosine kinases have received a great deal of attention; however, in the last few years, receptor (plasma membrane associated) and non-receptor protein-tyrosine phosphatases (PTPs) have also been shown to play important roles in development of the nervous system. In many cases PTPs have provocative distribution patterns or have been shown to be associated with specific cell adhesion and growth factor receptors. Additionally, altering PTP expression levels or activity impairs neuronal behavior. In this review we outline what is currently known about the role of PTPs in development, differentiation and neuronal physiology.