Biological actions of insulin are initiated by activation of the insulin receptor tyrosine kinase Protein tyrosine phosphatases (PTPases) PTP1B and PTP alpha are known to dephosphorylate the insulin receptor and may contribute to insulin resistance in diseases such as diabetes. We previously reported that overexpression of PTP1B in rat adipose cells significantly impairs insulin-stimulated translocation of GLUT4 [Chen, H., et al. (1997) J. Biol. Chem. 272, 8026]. in the present study, we treated adipose cells with a PTPase inhibitor containing the phosphotyrosyl mimetic difluorophosphonomethyl phenylalanine (F(2)Pmp) to determine whether we could improve the insulin resistance caused by overexpression of PTP1B or PTP alpha. Rat adipose cells transfected by electroporation with either PTP1B or PTP alpha were treated without or with the inhibitor, and effects on insulin-stimulated translocation of a cotransfected epitope-tagged GLUT4 were studied. The IC50 of the F(2)Pmp-containing inhibitor is 180 nhl for PTP1B and 10 mM for PTP alpha in vitro. As expected, in the absence of the inhibitor, overexpression of either PTP1B or PTP alpha caused a significant decrease in the amount of GLUT4 at the cell surface both in the absence and in the presence of insulin when compared with control cells transfected with epitope-tagged GLUT4 alone. Interestingly, the insulin resistance caused by overexpression of PTP1B (but not PTP alpha) was reversed by treating the transfected cells with the F(2)Pmp-containing inhibitor. Furthermore, the inhibitor blocked the insulin-stimulated association of PTP1B with the insulin receptor. We conclude that the F(2)Pmp-containing compound is a potent and specific inhibitor of overexpressed PTP1B that may be useful for designing rational therapies for treating insulin resistant diseases such as diabetes.