Data emerging from a number of different systems indicate that protein phosphatases are highly regulated and potentially responsive to changes in the levels of intracellular second messengers produced by extracellular stimulation. They may therefore be involved in the regulation of many cell functions. The protein phosphatases in the nervous system have not been well studied. However, a number of neuronal-specific regulators (such as DARPP-32 and G-substrate) exist, and brain protein phosphatases appear to have particularly low specific activity, suggesting that neuronal protein phosphatases possess considerable and unique potential for regulation. Several early events following depolarization or receptor activation appear to involve specific dephosphorylations, indicating that regulation of protein phosphatase activity is important for the control of many neuronal functions. This article reviews the current literature concerning the identification, regulation, and function of serine/threonine protein phosphatases in the brain, with particular emphasis on the regulation of the major protein phosphatases, PP1 and PP2A, and their potential roles in modulating neurotransmitter release and postsynaptic responses.