Protein-tyrosine phosphatases (PTPs) are considered important therapeutic targets because of their pivotal role as regulators of signal transduction and thus their implication in several human diseases such as diabetes, cancer, and autoimmunity. In particular, PTP1B has been the focus of many academic and industrial laboratories because it was found to be an important negative regulator of insulin and leptin signaling, and hence a potential therapeutic target in diabetes and obesity. As a result, significant progress has been achieved in the design of highly selective and potent PTP1B inhibitors. In contrast, little attention has been given to other potential drug targets within the PTP family. Guided by x-ray crystallography, molecular modeling, and enzyme kinetic analyses with wild type and mutant PTPs, we describe the development of a general, low molecular weight, non-peptide, non-phosphorus PTP inhibitor into an inhibitor that displays more than 100-fold selectivity for PTP†over PTP1B. Of note, our structure-based design principles, which are based on extensive bioinformatics analyses of the PTP family, are general in nature. Therefore, we anticipate that this strategy, here applied to PTPâ€, in principle can be used in the design and development of selective inhibitors of many, if not most PTPs.Protein-tyrosine phosphatases (PTPs) 1 are key regulators of signal transduction. Together with the counteracting proteintyrosine kinases, they control the phosphorylation status of many important proteins and are thereby critically involved in the regulation of fundamental cellular processes such as metabolism, cell growth, and differentiation. Aberrant tyrosine phosphorylation levels have been associated with the development of cancer, autoimmunity, and diabetes, thus indicating that PTPs might play important etiological and pathogenic roles in these diseases (1-5). In particular, two elegant studies with PTP1B knockout mice, in which increased insulin sensitivity and resistance to diet-induced obesity were observed (6, 7), indicated that PTP1B is an important negative regulator of insulin and leptin action, suggesting that inhibition of this enzyme could augment and prolong insulin and leptin signaling (8, 9). As a result, a number of academic and industrial laboratories have devoted considerable efforts toward the development of selective inhibitors of PTP1B for treatment of type 2 diabetes and obesity resulting in very significant progress (reviewed in Refs. 10 -12). The field has advanced significantly by a number of x-ray crystallographic structures (reviewed in Refs. 3, 13, and 14), and several research groups have successfully used structure-based designs to synthesize active site-directed, selective PTP1B inhibitors (15-20). Most important, two groups have demonstrated recently that it is possible to develop compounds that are selective for PTP1B over the highly homologous T cell-PTP (21, 22), thereby lending support to the view that selective inhibitors, which discriminate between even closely related PTP...