Multicellular animals use a three-part molecular toolkit to mediate phospho-tyrosine signaling: Tyrosine kinases (TyrK), protein tyrosine phosphatases (PTP), and Src Homology 2 (SH2) domains function, respectively, as ''writers,'' ''erasers,'' and ''readers'' of phospho-tyrosine modifications. How did this system of three components evolve, given their interdependent function? Here, we examine the usage of these components in 41 eukaryotic genomes, including the newly sequenced genome of the choanoflagellate, Monosiga brevicollis, the closest known unicellular relative to metazoans. This analysis indicates that SH2 and PTP domains likely evolved earliest-a handful of these domains are found in premetazoan eukaryotes lacking tyrosine kinases, most likely to deal with limited tyrosine phosphorylation cross-catalyzed by promiscuous Ser/Thr kinases. Modern TyrK proteins, however, are only observed in two lineages, metazoans and choanoflagellates. These two lineages show a dramatic coexpansion of all three domain families. Concurrent expansion of the three domain families is consistent with a stepwise evolutionary model in which preexisting SH2 and PTP domains were of limited utility until the appearance of the TyrK domain in the last common ancestor of metazoans and choanoflagellates. The emergence of the full threecomponent signaling system, with its dramatically increased encoding potential, may have contributed to the advent of metazoan multicellularity.choanoflagellates ͉ encoding potential ͉ tyrosine kinase ͉ src homology 2 ͉ protein tyrosine phosphatase T yrosine phosphorylation is essential for cell-cell communication in animals, mediating hormone, growth factor, immune, and adhesion-based signaling (1-4). Thus, phosphotyrosine (P-Tyr) signaling has traditionally been linked with metazoan multicellularity (5). Metazoan phospho-tyrosine signaling pathways are built from a three-part system of molecular components: Tyrosine kinases (TyrK) are catalytic domains that add phospho-tyrosine (P-Tyr) modifications, protein tyrosine phosphatases (PTP) are catalytic domains that remove these modifications, and Src Homology 2 (SH2) domains are recognition domains that readout these modifications. These modules play the role of ''writer,'' ''eraser,'' and ''reader,'' respectively, a triad of core functions at the heart of many biological and nonbiological information processing systems (6, 7). By using these three modules in combination, remarkably diverse signaling responses can be generated.A fundamentally important question is how this and other biological reader/writer/eraser information processing systems could have initially evolved, given the highly interdependent function of the individual parts in modern organisms. Because they act as a synergistic system, an incomplete set of components would be deficient in function. What selective advantage could have sustained a stepwise evolutionary path?The P-Tyr signaling machinery presents a particularly interesting case, because it appears to have evolved relatively rece...