Transmembrane protein tyrosine phosphatases (PTPases) comprise a newly identified class of receptor-like molecules. In most cases their ligands and the substrates they dephosphorylate are not known. In order to begin to explore the functions of the PTPases in cell physiology and in mammalian development, we examined the expression patterns of two closely related receptor-type tyrosine phosphatase genes, namely LAR and PTPδ, in fetal rat lung and in selected adult rat tissues. In the lung, in situ hybridization and immunohistochemistry show that the LAR mRNA and protein are expressed exclusively in the epithelium. In the early embryonic or fetal lung (day 13 to 18) LAR is expressed by all of the epithelial cells of the forming bronchial tree. This widespread pattern of expression is lost later in fetal life (day 21) as the lung matures and acquires the morphologic and biochemical features of the adult organ. LAR gene expression is then confined to two epithelial progenitor cells of the distal airways, namely the bronchiolar Clara cell and the alveolar type II cell. The LAR gene products were also found abundantly expressed in epithelial progenitor cells of adult esophagus, skin, and small intestine, all of which are continuously renewing epithelia. The rat PTPδ gene, on the other hand, is specifically expressed in the mesenchyme of the developing lung. The level of the PTPδ mRNA decreases as the lung matures. These results suggest that the two closely related receptor-type tyrosine phosphatases are differentially expressed in a tissue-specific fashion. They are expressed mostly in proliferating cells or in cells which have potential to proliferate. Therefore, one function of the two receptor-like tyrosine phosphatases may be to regulate proliferation and/or differentiation of different types of cells during development, during normal cell turnover, and during adult tissue repair. © 1995 wiley-Liss, Inc.