Mice heterozygous for insulin receptor (IR) and IR substrate (IRS)-1 deficiency provide a model of polygenic type 2 diabetes in which early-onset, genetically programmed insulin resistance leads to diabetes. Protein-tyrosine phosphatase 1B (PTP1B) dephosphorylates tyrosine residues in IR and possibly IRS proteins, thereby inhibiting insulin signaling. Mice lacking PTP1B are lean and have increased insulin sensitivity. To determine whether PTP1B can modify polygenic insulin resistance, we crossed PTP1B-/- mice with mice with a double heterozygous deficiency of IR and IRS-1 alleles (DHet). DHet mice weighed slightly less than wild-type mice and exhibited severe insulin resistance and hyperglycemia, with approximately 35% of DHet males developing diabetes by 9-10 weeks of age. Body weight in DHet mice with PTP1B deficiency was similar to that in DHet mice. However, absence of PTP1B in DHet mice markedly improved glucose tolerance and insulin sensitivity at 10-11 weeks of age and reduced the incidence of diabetes and hyperplastic pancreatic islets at 6 months of age. Insulin-stimulated phosphorylation of IR, IRS proteins, Akt/protein kinase B, glycogen synthase kinase 3beta, and p70(S6K) was impaired in DHet mouse muscle and liver and was differentially improved by PTP1B deficiency. In addition, increased phosphoenolpyruvate carboxykinase expression in DHet mouse liver was reversed by PTP1B deficiency. In summary, PTP1B deficiency reduces insulin resistance and hyperglycemia without altering body weight in a model of polygenic type 2 diabetes. Thus, even in the setting of high genetic risk for diabetes, reducing PTP1B is partially protective, further demonstrating its attractiveness as a target for prevention and treatment of type 2 diabetes.