The involvement of tyrosine phosphorylation in insulin action led us to hypothesize that increased activity of protein tyrosine phosphatases (PTPases) might contribute to insulin resistance in alloxan diabetes in the rat. Hepatic PTPase activity was measured using two artificial substrates phosphorylated on tyrosine: reduced, carboxyamidomethylated, and maleylated lysozyme (P-Tyr-RCML) and myelin basic protein (P-Tyr-MBP), as well as an autophosphorylated 48-kD insulin receptor tyrosine kinase domain (P-Tyr-IRKD). Rats that were made alloxan diabetic exhibited a significant increase in hepatic membrane (detergent-soluble) PTPase activity measured with P-Tyr-MBP, without a change in activity measured with P-Tyr-RCML or the P-Tyr-IRKD. The PTPase active with P-Tyr-MBP behaved as a high molecular weight peak during gel filtration chromatography. Characterization of this enzyme indicated it shared properties with CD45, the prototype for a class of transmembrane, receptor-like PTPases. Our results indicate that alloxan diabetes in the rat is associated with an increase in the activity of a large, membrane-associated PTPase which accounts for only a small proportion of insulin receptor tyrosine dephosphorylation. Nonetheless, increased activity of this PTPase may oppose tyrosine kinase-mediated insulin signal transmission, thus contributing to insulin resistance.