Lymphocytes migrate from the blood into tissue by binding to and migrating across endothelial cells. One of the endothelial cell adhesion molecules that mediate lymphocyte binding is VCAM-1. We have reported that binding to VCAM-1 activates endothelial cell NADPH oxidase for the generation of reactive oxygen species (ROS). The ROS oxidize and stimulate an increase in protein kinase C (PKC)α activity. Furthermore, these signals are required for VCAM-1-dependent lymphocyte migration. In this report, we identify a role for protein tyrosine phosphatase 1B (PTP1B) in the VCAM-1 signaling pathway. In primary cultures of endothelial cells and endothelial cell lines, Ab cross-linking of VCAM-1 stimulated an increase in serine phosphorylation of PTP1B, the active form of PTP1B. Ab cross-linking of VCAM-1 also increased activity of PTP1B. This activation of PTP1B was downstream of NADPH oxidase and PKCα in the VCAM-1 signaling pathway as determined with pharmacological inhibitors and antisense approaches. In addition, during VCAM-1 signaling, ROS did not oxidize endothelial cell PTP1B. Instead PTP1B was activated by serine phosphorylation. Importantly, inhibition of PTP1B activity blocked VCAM-1-dependent lymphocyte migration across endothelial cells. In summary, VCAM-1 activates endothelial cell NADPH oxidase to generate ROS, resulting in oxidative activation of PKCα and then serine phosphorylation of PTP1B. This PTP1B activity is necessary for VCAM-1-dependent transendothelial lymphocyte migration. These data show, for the first time, a function for PTP1B in VCAM-1-dependent lymphocyte migration.