Most, if not all, signal transduction at cell surface receptors in animal cells appears to occur by one of four basic mechanisms, 1) cyclic nucleotide systems; 2) phosphoinositidase systems; 3) ion channel systems; 4) tyrosine kinase systems. The end effects of all four signal transduction systems are largely mediated by protein (serine/threonine) kinases and/or phosphatases. Thus, the only known high affinity intracellular receptors for cyclic nucleotides and diacylglycerol are cyclic nucleotide-dependent protein kinases and protein kinase C respectively, while activation of tyrosine kinase systems causes concomitant activation of several different protein (serine/threonine) kinases. Many, although not all, effects of elevated Ca2+ are also mediated by calmodulin-dependent protein kinases. Initial tests of the involvement of any of these kinases in control of a physiological system can be made using cell-permeable kinase activators or inhibitors, e.g. cyclic nucleotide analogues, phorbol esters or Ca2+ ionophores. A family of four protein (serine/threonine) phosphatases account for dephosphorylation of all known cytosolic or nuclear substrates phosphorylated by these protein kinases. Two of these (PP1 and PP2A) have a broad substrate specificity and appear to be highly conserved during evolution, being present in both animal and plant kingdoms. PP1 is potently inhibited by protein inhibitors-1 and -2, while the marine toxin and tumour promoter, okadaic acid, inhibits PP2A with extreme potency and PP1 less potently. Okadaic acid provides a novel cell-permeable probe for examining the role of protein phosphorylation, and PP1 and PP2A in particular, in any physiological process. Recent examples of its use are discussed. These approaches can provide initial evidence that a particular protein is regulated in response to an extracellular signal by protein phosphorylation. Confirmation of this hypothesis may be obtained by showing that the precise residue(s) phosphorylated by the protein kinase in a cell-free system are also phosphorylated in intact cells in response to the extracellular signal. Sensitive methods are now available for the analysis of phosphorylation sites by gas phase sequencing and Fast Atom Bombardment (FAB) mass spectrometry. Sequencing of phosphorylation sites also allows the development of synthetic peptide assays for the various kinases involved. These methods will be illustrated using the author's own studies on phosphorylation of enzymes of lipid metabolism.