Axonal growth and guidance, like other aspects of neuronal differentiation, can be regulated by changes in tyrosine phosphorylation. Although much is known concerning the role of tyrosine kinases in these processes, relatively little is known about the nature and function of protein tyrosine phosphatases (PTPs) that may be involved. To identify the PTPs expressed in the embryonic chicken CNS at the time of axon growth, we performed a polymerase chain reaction based "screen" using degenerate primers directed against conserved regions of the PTP catalytic domain. We obtained five distinct PTP-related cDNAs, two of which code for novel PTPs. One, designated CRYP-2, is selectively expressed in the CNS. Full-length cloning of CRYP-2 revealed that it is a receptor-type PTP with an adhesion molecule-like extracellular region comprising fibronectin (FN) type III repeats and a single catalytic domain in the intracellular region. It is alternatively spliced in the juxtamembrane region, similar to other PTPs recently cloned. CRYP-2 mRNA is strongly expressed in the brain during the time of axon growth; it is downregulated toward the end of embryogenesis. Western blot analysis identifies a 330-kDa glycoprotein as CRYP-2 and confirms that the protein is downregulated after hatching. Immunostaining of cerebellar neurons in vitro reveals that CRYP-2 is expressed on neuronal cell bodies and processes, but not on glia. The CAM-like structure, developmental pattern of expression, and neuron-specific localization of the CRYP-2 PTP suggest that it is involved in neuronal differentiation, particularly axon growth.