Protein tyrosine phosphatases (PTPs) are signaling enzymes that control a diverse array of cellular processes. Site-directed mutagenesis, combined with detailed kinetic and mechanistic studies of Yersinia PTP, have contributed greatly to the understanding of the chemical mechanism for PTP catalysis, the nature of the enzymatic transition state, and the means by which the transition state is stabilized. Significant progress has been made in developing specific small-molecule inhibitors as tools to dissect the functional roles of PTP both in normal physiology and pathological conditions. Despite the conserved structural and catalytic properties, recent results show that there are sufficient differences in the PTPs so that potent and selective bidentate inhibitors that simultaneously bind both the active site and a unique adjacent site can be obtained.