Several lines of evidence support a role for protein tyrosine phosphatase 1B (PTP-1B) in metabolism, and specifically in insulin sensitivity and obesity. We report the development of reagents for the amplification and sequencing of the PTP-1B gene, which has resulted in the identification of a novel single nucleotide polymorphism (SNP), designated 981C-->T. We found a significant association between this SNP and the risk of either impaired glucose tolerance (IGT) or type 2 diabetes in the Oji-Cree of Sandy Lake, Ontario, Canada. Six hundred and fifty-three subjects were genotyped using PCR amplification of exon 8, followed by digestion with the restriction enzyme AvaI. Sixty-eight subjects were heterozygotes, and none was a homozygote. Thus, the overall frequencies of the C allele and the T allele were 0.948 and 0.052, respectively. Subjects with the PTP-1B 981T/981C genotype were approximately 40% less likely to have IGT or diabetes as subjects with the 981C/981C genotype (P = 0.040). There was no difference in quantitative traits among subjects grouped according to the PTP-1B 981C-->T SNP genotype. These very preliminary findings suggest that genomic variation in PTP-1B is associated with a reduced risk of diabetes and are consistent with the idea that this protein is important in metabolism.