Dual-tone multifrequency (DTMF), also known as Touch Tone or Tone Dialing, is used for telephone signaling over the line in the voice frequency band to the call switching center. DTMF is an example of a multifrequency shift keying (MFSK) system. Today DTMF is used for most call setup to the telephone exchange, at least in the Western world, and trunk signalling is now done out of band using the SS7 signaling system. The in band trunk signalling tones were different from the tones known as touch tone with a triangular matrix being used rather than a square matrix. See: blue box for more details on the switching tones.

Prior to DTMF the phone systems had used a system known as pulse or loop disconnect (LD) signalling to dial numbers, which works by rapidly disconnecting and connecting the calling party's phone line, like flicking a light switch on and off. The repeated connection and disconnection sounds like a series of clicks. The LD range was restricted for technical reasons, and placing calls over longer distances required either operator assistance or the provision of subscriber trunk dialling equipment.

DTMF was developed at Bell Labs in order to allow dialing signals to dial longdistance numbers, potentially over nonwire links such as microwave links or satellites. Encoder/decoders were added at the end offices that would convert the standard pulse signals into DTMF tones and play them down the line to the remote end office. At the remote site another encoder/decoder would decode the tones and perform pulse dialing. It was as if you were connected directly to that end office, yet the signaling would work over any sort of link. This idea of using the existing network for signaling as well as the message is known as in-band signaling.

It was clear even in the late 1950s when DTMF was being developed that the future of switching lay in electronic switches, as opposed to the mechanical crossbar systems then in use. In this case pulse dialing made no sense at any point in the circuit, and plans were made to roll DTMF out to end users as soon as possible. Various tests of the system occurred throughout the 1960s where DTMF became known as Touch Tone.

The Touch Tone system also introduced a standardized keypad layout. After testing 18 different layouts, they eventually chose the one familiar to us today, with I in the upper-left and 0 at the bottom. The adding-machine layout, with 1 in the lower-left was also tried, but at that time few people used adding machines, and having the I at the "start" (in European language reading order) led to fewer typing errors. In retrospect, many people consider that this was a mistake. With the widespread introduction of computers and bank machines, the phone keyboard has become "oddball", causing mistakes.