Computer‐aided drug design was performed on a diverse set of 103 biphenyl derivatives that demonstrated antidiabetic activity by restraining the protein tyrosine phosphatase 1B (PTP 1B) receptor. A four‐point pharmacophore hypothesis using the PHASE module of Schrödinger suite with one hydrogen bond acceptor (A) and three aromatic rings (R) as pharmacophoric features was generated. The hypothesis, ARRR.2, considered the best hypothesis in the present study is characterized by survival score (3.553), cross‐validated r2 (Q2) (0.722), regression coefficient (0.949), Pearson R (0.867), and F value (492.6). The developed pharmacophore model was externally validated by predicting the activity of test set molecules. Docking algorithm combined with the drug–receptor binding free energetic and pharmacokinetic drug profile envisaged a novel concept, which may provide structural insights for the development of potential PTP 1B inhibitors. The study also provided a valid rapport between pharmacophore drug mapping, atom‐based three‐dimensional quantitative structure–activity relationship, molecular docking, sitemap, molecular simulations, and pharmacokinetic prediction approaches demonstrating the trends in activity. The results of these ligand–receptor relationship studies may account to design a legitimate template for the development and optimization of highly selective and potent PTP 1B inhibitors. Copyright © 2012 John Wiley & Sons, Ltd.