CD45 is one of the most abundant leukocyte cell surface glycoproteins and is expressed exclusively upon cells of the hematopoietic system. Different isoforms of CD45 are generated by alternative splicing and are expressed in cell type-specific patterns on functional subpopulations of lymphocytes. In a major advance, CD45 was identified as one of the first members of a novel class of enzymes, the protein tyrosine phosphatases (PTPs). This serendipitous discovery linked CD45 to the process of reversible protein tyrosine phosphorylation, a key regulatory mechanism for controlling the growth and division of eukaryotic cells, and provided the impetus for most of the studies described in this review. CD45 is now established as a critical component of the signal transduction machinery of lymphocytes. In particular, evidence from genetic experiments indicates that CD45 plays a pivotal role in antigen-stimulated proliferation of T lymphocytes and in thymic development. Two members of the Src-family of protein tyrosine kinases (PTKs), the p56lck and p59fyn proteins, have been implicated as physiological substrates of CD45, providing an important clue to how the action of this leukocyte-specific PTP might influence signaling by the T cell antigen receptor. Structure-function analysis of CD45 and other PTPs has identified structural features of PTP catalytic domains required for enzymatic activity. However, despite intensive efforts, little is known about how the activity of CD45 is regulated. The external domain of CD45 does not appear to be absolutely required for signal transduction by the T cell receptor, and there is currently no evidence that ligand binding modulates CD45 activity. Analysis of CD45 isoform expression has revealed a hitherto unrecognized plasticity in isoform usage by T cells and other leukocytes, adding to the regulatory complexity of isoform expression.