Phosphorylation and dephosphorylation of a protein often serve as an "on-and-off" switch in the regulation of cellular activities. Recent studies demonstrate the involvement of protein phosphorylation in almost all signaling pathways in plants. A significant portion of the sequenced Arabidopsis genome encodes protein kinases and protein phosphatases that catalyze reversible phosphorylation. For optimal regulation, kinases and phosphatases must strike a balance in any given cell. Only a very small fraction of the thousands of protein kinases and phosphatases in plants has been studied experimentally. Nevertheless, the available results have demonstrated critical functions for these enzymes in plant growth and development. While serine/threonine phosphorylation is widely accepted as a predominant modification of plant proteins, the function of tyrosine phosphorylation, desptie its overwhelming importance in animal systems, had been largely neglected until recently when tyrosine phosphatases (PTPs) were characterized from plants. This review focuses on the structure, regulation, and function of protein phosphatases in higher plants.