Recent progress in the field of cyclic nucleotides has shown that a large array of closely related proteins is involved in each step of the signal transduction cascade. Nine families of adenylyl cyclases catalyze the synthesis of the second messenger cAMP, and protein kinases A, the intracellular effectors of cAMP, are composed of four regulatory and three catalytic subunits. A comparable heterogeneity has been discovered for the enzymes involved in the inactivation of cyclic nucleotide signaling. In mammals, 19 different genes encode the cyclic nucleotide phosphodiesterases (PDEs), the enzymes that hydrolyze and inactivate cAMP and cGMP. This is only an initial level of complexity, because each PDE gene contains several distinct transcriptional units that give rise to proteins with subtle structural differences, bringing the number of the PDE proteins close to 50. The molecular biology of PDEs in Drosophila and Dictyostelium has shed some light on the role of PDE diversity in signaling and development. However, much needs to be done to understand the exact function of these enzymes, particularly during mammalian development and cell differentiation. With the identification and mapping of regulatory and targeting domains of the PDEs, modularity of the PDE structure is becoming an established tenet in the PDE field. The use of different transcriptional units and exon splicing of a single PDE gene generates proteins with different regulatory domains joined to a common catalytic domain, therefore expanding the array of isoforms with subtle differences in properties and sensitivities to different signals. The physiological context in which these different isoforms function is still largely unknown and undoubtedly will be a major area of expansion in the years to come.