Protein tyrosine phosphorylation regulates many aspects of cell growth and differentiation. Since cellular tyrosine phosphorylation levels are controlled by the antagonizing actions of the protein tyrosine kinases (PTKs) and the protein tyrosine phosphatases (PTPs), these enzymes play a direct role in regulating processes as diverse as oncogenesis and neuronal development. In particular, the transmembrane group of PTPs, known as the receptor-type protein tyrosine phosphatases (RPTPs), has been linked to regulation of axon growth and guidance during development and regeneration. The regulation of activity of these RPTPs is of clear importance, yet the fundamental mechanisms underlying this regulation are poorly understood. While extracellular ligands are well known to dimerize and activate the receptor protein tyrosine kinases, the extent to which RPTP regulation parallels this scenario is largely unknown. We have examined the dimerization state and the relationship this state has with the phosphatase activity of the neuronal RPTP, PTPRO. We have found that PTPRO, a Type III RPTP, can exist in a dimerized state, likely regulated by disulfide linkages in the intracellular domain. Ligand addition to a chimeric PTPRO increases dimerization of the transmembrane and intracellular domains. Ligand addition to the chimeric PTPRO also decreases its phosphatase activity towards artificial peptides and a putative substrate, TrkC, a protein also known to be important in neuronal development. PTPRO's regulation of TrkC may be physiologically relevant as the proteins can be co-precipitated from transfected cells and PTPRO's dephosphorylation of TrkC is efficient compared to that of other RPTPs. The decrease in PTPRO's activity upon ligand-induced dimerization was unexpected as dimerization of a structurally-similar RPTP family member suggested the opposite functional outcome. This work suggests a complex relationship between dimerization and activity for the Type III RPTPs, which include PTPRO. The results presented in this dissertation will extend the current knowledge on RPTP functions and the cellular processes they regulate.