It is now widely accepted that abnormal processing of the Alzheimer's amyloid precursor protein (APP) can contribute significantly to Alzheimer's disease (AD). APP can be processed proteolytically to give rise to several fragments, including toxic beta-amyloid (Abeta) fragments that are subsequently deposited as amyloid plaques in brains of AD patients. Data from several groups have revealed that APP processing can be regulated by phosphorylation and phosphorylation-dependent events. Consequently, the key players controlling such signal transduction cascades, the protein kinases and phosphatases, as well as their corresponding regulatory proteins, take on added importance. By characterizing how altered cell signaling might contribute to APP processing, one can identify potential targets for signal transduction therapeutics. Here, we review APP phosphorylation and phosphorylation-dependent events in APP processing, with particular focus on phosphatases that impact on APP processing, and their binding and regulatory proteins. Particular attention is given to protein phosphatase 1 (PP1), as it seems to have a central role not only in the regulation of APP cleavage events but also in the molecular control of neurotransmission and in age-related memory deterioration. The development of specific drugs targeting protein phosphatase binding proteins would constitute potential therapeutic agents with a high degree of specificity. The identification of such targets provides novel therapeutic avenues for normal aging and for neurodegenerative conditions such as AD.