The global epidemic of obesity and type-2 diabetes mellitus (T2DM) has highlighted the need for new therapeutic approaches. The association of insulin resistance with these disorders and the knowledge that insulin receptor signaling is mediated by tyrosine (Tyr) phosphorylation have generated great interest in the regulation of the balance between Tyr phosphorylation and dephosphorylation. Several protein Tyr phosphatases (PTPs) have been implicated in the regulation of insulin action, with the most convincing data for PTP1B. Murine models targeting PTP1B, PTP1B(-/-)mice, demonstrate enhanced insulin sensitivity without the weight gain seen with other insulin sensitizers such as peroxisome proliferator-activated receptor gamma (PPARgamma) agonists, probably due to a second action of PTP1B as a negative regulator of leptin signaling. Despite intensive efforts and recent progress, a safe, selective and efficacious PTP1B inhibitor has yet to be identified.