Complex and diverse signal transduction circuits are responsible for the efficient functioning of cellular network. Protein kinases and O-protein phosphatases are primarily responsible for propagating such stimuli within a eukaryotic cell. However, there is limited understanding of O-protein phosphatases in the prokaryotic genomes. The availability of complete genome sequence information for several prokaryotes permits a genome-wide survey of O-protein phosphatases. The distribution of the various protein phosphatase families has been observed to be mosaic, with the exception of the members of the phospho protein family P (PPP), which is consistent with previous studies. The PPP family is ubiquitous in the prokaryotic world and undergoes the highest sequence divergence within a genome amongst phosphatases studied. The co-occurrence of low molecular mass tyrosine phosphatase (LMWPc) and PPP domain in a single polypeptide suggests that the protein present in Archaeoglobus fulgidus might represent the progenitor for all protein phosphatases. The curation of data on prokaryotic protein phosphatases provides a convenient framework for the analysis of domain architectures and for characterising structural and functional properties of this important family of signalling proteins.