Protein tyrosine phosphatase 1B (PTP1B) has recently been implicated in the regulation of body weight. A surprising phenotype of PTP1B-deficient mice is their resistance to diet-induced obesity. Since leptin is one of the primary hormones involved in the regulation of body weight and energy homeostasis, we investigated whether PTP1B affects leptin receptor (lepR) signaling directly. A mouse hypothalamic cell line, GT1-7, was established as a suitable cell model for the study of leptin signaling. Stimulation of GT1-7 cells by leptin caused tyrosine phosphorylation of endogenous STAT3 and activation of a STAT-dependent luciferase reporter gene. Over-expression of PTP1B in GT1-7 cells resulted in a dose-dependent decrease in endogenous JAK2 and STAT3 tyrosine phosphorylation compared with cells transfected with lepR alone. Consistent with inhibition of JAK-STAT signaling, PTP1B over-expression caused a dose-dependent decrease in leptin-induced, STAT-dependent luciferase reporter gene activation in GT1-7 cells. Furthermore, over-expression of PTP1B led to a decrease in mRNA accumulation of suppressor-of-cytokine-signalling-3 (SOCS3) and c-fos, genes that are acutely induced by leptin. Using gene microarray analysis, we confirmed that PTP1B reduces the level of gene expression of SOCS3 and showed that the expression level of other leptin-regulated genes was affected. Genes up-regulated by leptin were decreased in cells over-expressing PTP1B. Conversely, the expression of genes down-regulated by leptin was enhanced by PTP1B over-expression in GT1-7 cells. Our findings indicate that PTP1B is a negative regulator of leptin signaling and suggest that PTP1B inhibitors might be efficacious in the treatment of obesity by increasing leptin sensitivity.