Previous studies implicate protein-tyrosine phosphatase 1B (PTP1B) and leukocyte antigen-related phosphatase (LAR) as negative regulators of insulin signaling. The expression and/or activity of PTP1B and LAR are increased in muscle of insulin-resistant rodents and humans. Overexpression of LAR selectively in muscle of transgenic mice causes whole body insulin resistance. To determine whether overexpression of PTP1B also causes insulin resistance, we generated transgenic mice overexpressing human PTP1B selectively in muscle at levels similar to those observed in insulin-resistant humans. Insulin-stimulated insulin receptor (IR) tyrosyl phosphorylation and phosphatidylinositol 3'-kinase activity were impaired by 35% and 40-60% in muscle of PTP1B-overexpressing mice compared with controls. Insulin stimulation of protein kinase C (PKC)lambda/zeta activity, which is required for glucose transport, was impaired in muscle of PTP1B-overexpressing mice compared with controls, showing that PTP1B overexpression impairs activation of these PKC isoforms. Furthermore, hyperinsulinemic-euglycemic clamp studies revealed that whole body glucose disposal and muscle glucose uptake were decreased by 40-50% in PTP1B-overexpressing mice. Overexpression of PTP1B or LAR alone in muscle caused similar impairments in insulin action; however, compound overexpression achieved by crossing PTP1B- and LAR-overexpressing mice was not additive. Antibodies against specific IR phosphotyrosines indicated overlapping sites of action of PTP1B and LAR. Thus, overexpression of PTP1B in vivo impairs insulin sensitivity, suggesting that overexpression of PTP1B in muscle of obese humans and rodents may contribute to their insulin resistance. Lack of additive impairment of insulin signaling by PTP1B and LAR suggests that these PTPs have overlapping actions in causing insulin resistance in vivo.