Obesity is a major health problem and a risk factor for type 2 diabetes. Leptin, an adipocyte-secreted hormone, acts on the hypothalamus to inhibit food intake and increase energy expenditure. Most obese individuals develop hyperleptinemia and leptin resistance, limiting the therapeutic efficacy of exogenously administered leptin. Mice lacking the tyrosine phosphatase PTP1B are protected from diet-induced obesity and are hypersensitive to leptin, but the site and mechanism for these effects remain controversial. We generated tissue-specific PTP1B knockout (Ptpn1(-/-)) mice. Neuronal Ptpn1(-/-) mice have reduced weight and adiposity, and increased activity and energy expenditure. In contrast, adipose PTP1B deficiency increases body weight, whereas PTP1B deletion in muscle or liver does not affect weight. Neuronal Ptpn1(-/-) mice are hypersensitive to leptin, despite paradoxically elevated leptin levels, and show improved glucose homeostasis. Thus, PTP1B regulates body mass and adiposity primarily through actions in the brain. Furthermore, neuronal PTP1B regulates adipocyte leptin production and probably is essential for the development of leptin resistance.