A novel Drosophila receptor-like protein tyrosine phosphatase gene, DPTP4E, was isolated and characterized. DPTP4E, located at cytological position 4E1-2, is comprised of 10 exons; its RNA products are widely expressed during embryonic development, including the developing central nervous system. DPTP4E produces three major developmentally regulated transcripts of 6.5, 7.0, and 7.5 kilobases. The two major embryonic transcripts arise as the result of the alternative splicing of exon IX; as a consequence, two proteins (200 and 183 kDa) are produced which differ in their carboxyl-terminal sequences. The deduced extracellular domain, which lies between two putative hydrophobic transmembrane segments, contains 11 fibronectin type III-like repeats and 25 putative N-glycosylation sites. A single conserved protein tyrosine phosphatase (PTPase) catalytic domain, which shows a high level of amino acid identity to the Drosophila PTPase DPTP10D and human HPTP beta, is found in the predicted intracellular domain; this PTPase domain, when expressed as a fusion protein in Escherichia coli, exhibits PTPase activity. The possible implications of these findings are discussed.