To study the expression of protein tyrosine phosphatases (PTPs) in pancreatic islets, a cDNA library from islet cells was constructed and analysed. Twenty-one different PTPs were found to be expressed in islet cells, including three previously unknown PTPs. One of these, IA-2beta, was cloned, sequenced, and found to be related to IA-2, a major autoantigen in insulin-dependent diabetes mellitus (IDDM). The intracellular and extracellular domains of IA-2beta were 74 and 27% identical, respectively, to the intracellular and extracellular domains of IA-2. Approximately 70 and 45% of sera from patients with IDDM had autoantibodies that immunoprecipitated recombinant IA-2 and IA-2beta, respectively. By use of deletion mutants, we were able to show that the autoantibodies reacted with the intracellular, and not the extracellular, domains of IA-2 and IA-2beta, and that the major antigenic determinants resided within the COOH-terminus of the intracellular domains. Further studies revealed that approximately 97% of the IDDM sera that reacted with IA-2beta also reacted with IA-2, whereas only 50% of IDDM sera that reacted with IA-2 also reacted with IA-2beta. In contrast to the reactivity of IDDM sera with the IA-2 and IA-2beta, IDDM sera did not react with six other members of the PTP family. It is concluded that many members of the PTP family are expressed in pancreatic islets, but thus far only IA-2 and IA-2beta appear to be recognized as autoantigens by IDDM sera.