Protein tyrosine phosphatase sigma (PTP-sigma, encoded by the Ptprs gene) is a member of the LAR subfamily of receptor-like protein tyrosine phosphatases that is highly expressed during mammalian embryonic development in the germinal cell layer lining the lateral ventricles of the developing brain, dorsal root ganglia, Rathke's pouch, olfactory epithelium, retina and developing lung and heart. On the basis of its expression and homology with the Drosophila melanogasterorthologues DPTP99 and DPTP100A (refs 5,6), which have roles in the targeting of axonal growth cones, we hypothesized that PTP-sigma may also have a modulating function in cell-cell interactions, as well as in axon guidance during mammalian embryogenesis. To investigate its function in vivo, we generated Ptprs-deficient mice. The resulting Ptprs-/-animals display retarded growth, increased neonatal mortality, hyposmia and hypofecundity. Anatomical and histological analyses showed a decrease in overall brain size with a severe depletion of luteinizing hormone-releasing hormone (LHRH)-immunoreactive cells in Ptprs-/- hypothalamus. Ptprs-/- mice have an enlarged intermediate pituitary lobe, but smaller anterior and posterior lobes. These results suggest that tyrosine phosphorylation-dependent signalling pathways regulated by PTP-sigma influence the proliferation and/or adhesiveness of various cell types in the developing hypothalamo-pituitary axis.