Insulin resistance in skeletal muscle may be an expression of the genetic basis of a common form of non-insulin-dependent diabetes mellitus (NIDDM) in humans. Impaired insulin action results from an apparent postreceptor defect in insulin signal transduction that limits the influence of the hormone on various protein serine/threonine kinases and phosphatases that are thought to contribute to the mechanism by which insulin affects intracellular events. The fact that numerous responses to insulin are affected suggests that the cause of insulin resistance involves an early step in insulin action. Therefore, we examined the influence of insulin on protein tyrosine phosphatase (PTPase) activities, which may counteract the protein tyrosine kinase activity of the insulin receptor in skeletal muscle of insulin-sensitive and insulin-resistant humans. Insulin infusion in vivo produced a rapid 25% suppression of soluble-PTPase activity in muscle of insulin-sensitive subjects, but this response was severely impaired in subjects who were insulin resistant. Insulin did not affect PTPase activity in the particulate fraction of muscle from either group, but basal particulate activity was 33% higher in resistant subjects than in sensitive subjects. Either or both of these abnormal characteristics of PTPase activities could be central to the causes of insulin resistance and NIDDM.