The role of protein-tyrosine phosphatase 1B (PTP1B) in diabetes was investigated using an antisense oligonucleotide in ob/ob and db/db mice. PTP1B antisense oligonucleotide treatment normalized plasma glucose levels, postprandial glucose excursion, and HbA_1C. Hyperinsulinemia was also reduced with improved insulin sensitivity. PTP1B protein and mRNA were reduced in liver and fat with no effect in skeletal muscle. Insulin signaling proteins, insulin receptor substrate 2 and phosphatidylinositol 3 (PI3)-kinase regulatory subunit p50α, were increased and PI3-kinase p85α expression was decreased in liver and fat. These changes in protein expression correlated with increased insulin-stimulated protein kinase B phosphorylation. The expression of liver gluconeogenic enzymes, phosphoenolpyruvate carboxykinase, and fructose-1,6-bisphosphatase was also down-regulated. These findings suggest that PTP1B modulates insulin signaling in liver and fat, and that therapeutic modalities targeting PTP1B inhibition may have clinical benefit in type 2 diabetes.