Mammalian Cdc25 phosphatase is responsible for the dephosphorylation of Cdc2 and other cyclin-dependent kinases at Thr14 and Tyr15, thus activating the kinase and allowing cell cycle progression. The catalytic domain of this dual-specificity phosphatase has recently been mapped to the 180 most C-terminal amino acids. Apart from a CX3R motif, which is present at the active site of all known tyrosine phosphatases, Cdc25 does not share any obvious sequence similarity with any of those enzymes. Until very recently, the Cdc25 family was the only subfamily of tyrosine phosphates for which no three-dimensional structural data were available. Using the generalized profile technique, a sensitive method for sequence database searches, we found an extended and highly significant sequence similarity between the Cdc25 catalytic domain and similarly sized regions in other proteins: the non-catalytic domain of two distinct families of MAP-kinase phosphates, the non-catalytic domain of several ubiquitin protein hydrolases, the N and C-terminal domain of rhodanese, and a large and heterogeneous groups of stress-response proteins from all phyla. The relationship of Cdc25 to the structurally well-characterized rhodanese spans the entire catalytic domain and served as template for a structural model for human Cdc25a, which is fundamentally different from previously suggested models for Cdc25 catalytic domain organization. The surface positioning of subfamily-specific conserved residues allows us to predict the sites of interaction with Cdk2, a physiological target of Cdc25a. Based on the results of this analysis, we also predict that the budding yeast arsenate resistance protein Acr2 and the ORF Ygr203w encode protein phosphatases with catalytic properties similar to that of the Cdc25 family. Recent determination of the crystal structure of the Cdc25a catalytic domain supports the validity of the model and demonstrates the power of the generalized sequence profile technique in homology-based modeling of the three-dimensional structure of a protein having a weak but significant sequence similarity with a structurally characterized protein.