The activation of signal transduction pathways by extracellular stimuli, such as growth factors or hormones, ultimately results in changes in the expression of specific genes. The altered pattern of expression eventually determines the resulting cellular consequences, e.g. cell growth, division, or differentiation. It has been well established that the reversible phosphorylation of proteins is a major regulatory mechanism in these processes. However, while much has been learned about the role of kinases, the involvement of protein phosphatases is less clear and has only recently begun to be investigated in more detail. This review will present some of the new findings that demonstrate a crucial regulatory function of serine/threonine protein phosphatases (PPases) in gene regulatory processes.