Protein tyrosine phosphatases (PTPs) are required for the dephosphorylation of the insulin receptor (IR) and its initial cellular substrates, and it has recently been reported that PTP-1B may play a role in the pathogenesis of insulin resistance in obesity and type 2 diabetes mellitus (DM). We therefore determined the amount and activity of PTP-1B in abdominal adipose tissue obtained from lean nondiabetic subjects (lean control (LC)), obese nondiabetic subjects (obese control (OC)), and subjects with both type 2 DM (DM2) and obesity (obese diabetic (OD)). PTP-1B protein levels were 3-fold higher in OC than in LC (1444 +/- 195 U vs 500 +/- 146 U (mean +/- SEM), P < .015), while OD exhibited a 5.5-fold increase (2728 +/- 286 U, P < .01). PTP activity was assayed by measuring the dephosphorylating activity toward a phosphorus 32-labeled synthetic dodecapeptide. In contrast to the increased PTP-1B protein levels, PTP-1B activity per unit of PTP-1B protein was markedly reduced, by 71% and 88% in OC and OD, respectively. Non-PTP-1B tyrosine phosphatase activity was comparable in all three groups. Similar results were obtained when PTP-1B activity was measured against intact human IR. A significant correlation was found between body mass index (BMI) and PTP-1B level (r = 0.672, P < .02), whereas BMI and PTP-1B activity per unit of PTP-1B showed a strong inverse correlation (r = -0.801, P < .002). These data suggest that the insulin resistance of obesity and DM2 is characterized by the increased expression of a catalytically impaired PTP-1B in adipose tissue and that impaired PTP-1B activity may be pathogenic for insulin resistance in these conditions.