Intracellular levels of phosphorylation are regulated by the coordinated action of protein kinases and phosphatases. Disregulation of this balance can lead to cellular transformation. Here we review knowledge of the mechanisms of one protein phosphatase, the tumour suppressor PTEN/MMAC/TEP 1 apropos its role in tumorigenesis and signal transduction. PTEN plays an important role in the phosphatidyl-inositol-3-kinase (PI3-K) pathway by catalyzing degradation of phosphatidylinositol-(3,4,5)-triphosphate generated by PI3-K. This inhibits downstream targets mainly protein kinase B (PKB/Akt), cell survival and proliferation. PTEN contributes to cell cycle regulation by blockade of cells entering the S phase of the cell cycle, and by upregulation of p27(Kip1) which is recruited into the cyclin E/cdk2 complex. PTEN also modulates cell migration and motility by regulation of the extracellular signal-related kinase - mitogen activated protein kinase (ERK-MAPK) pathway and by dephosphorylation of focal adhesion kinase (FAK). We also emphasize the increasingly important role that PTEN has from an evolutionary point of view. A number of PTEN functions have been elucidated but more information is needed for utilization in clinical application and potential cancer therapy.