Protein tyrosine phosphatases (PTPs) are a diverse group of enzymes that contain a highly conserved active site motif, Cys-x5-Arg (Cx5R). The PTP superfamily enzymes, which include tyrosine-specific, dual specificity, low-molecular-weight, and Cdc25 phosphatases, are key mediators of a wide variety of cellular processes, including growth, metabolism, differentiation, motility, and programmed cell death. The PTEN/MMAC1/TEP1 gene was originally identified as a candidate tumor suppressor gene located on human chromosome 10q23; it encodes a protein with sequence similarity to PTPs and tensin. Recent studies have demonstrated that PTEN plays an essential role in regulating signaling pathways involved in cell growth and apoptosis, and mutations in the PTEN gene are now known to cause tumorigenesis in a number of human tissues. In addition, germ line mutations in the PTEN gene also play a major role in the development of Cowden and Bannayan-Zonana syndromes, in which patients often suffer from increased risk of breast and thyroid cancers. Biochemical studies of the PTEN phosphatase have revealed a molecular mechanism by which tumorigenesis may be caused in individuals with PTEN mutations. Unlike most members of the PTP superfamily, PTEN utilizes the phosphoinositide second messenger, phosphatidylinositol 3,4,5-trisphosphate (PIP3), as its physiologic substrate. This inositol lipid is an important regulator of cell growth and survival signaling through the Ser/Thr protein kinases PDK1 and Akt. By specifically dephosphorylating the D3 position of PIP3, the PTEN tumor suppressor functions as a negative regulator of signaling processes downstream of this lipid second messenger. Mutations that impair PTEN function result in a marked increase in cellular levels of PIP3 and constitutive activation of Akt survival signaling pathways, leading to inhibition of apoptosis, hyperplasia, and tumor formation. Certain structural features of PTEN contribute to its specificity for PIP3, as well as its role(s) in regulating cellular proliferation and apoptosis. Recently, myotubularin, a second PTP superfamily enzyme associated with human disease, has also been shown to utilize a phosphoinositide as its physiologic substrate.