The lymphoid tyrosine phosphatase LYP, encoded by the PTPN22 gene, is a critical regulator of signaling in T cells and recently emerged as a candidate target for therapy of autoimmune diseases. Here, by library screening, we identified a series of noncompetitive inhibitors of LYP that showed activity in primary T cells. Kinetic analysis confirmed that binding of the compounds to the phosphatase is nonmutually exclusive with respect to a known bidentate competitive inhibitor. The mechanism of action of the lead inhibitor compound 4e was studied by a combination of hydrogen/deuterium-exchange mass spectrometry and molecular modeling. The results suggest that the inhibitor interacts critically with a hydrophobic patch located outside the active site of the phosphatase. Targeting of secondary allosteric sites is viewed as a promising yet unexplored approach to develop pharmacological inhibitors of protein tyrosine phosphatases. Our novel scaffold could be a starting point to attempt development of "nonactive site" anti-LYP pharmacological agents.