The PTPN1 gene codes for protein tyrosine phosphatase 1B (PTP1B) (EC 3.1.3.48), which negatively regulates insulin signaling by dephosphorylating the phosphotyrosine residues of the insulin receptor kinase activation segment. PTPN1 is located in 20q13, a genomic region linked to type 2 diabetes in multiple genetic studies. Surveys of the gene have previously identified only a few uncommon coding single nucleotide polymorphisms (SNPs). We have carried out a detailed association analysis of 23 noncoding SNPs spanning the 161-kb genomic region, which includes the PTPN1 gene. These SNPs have been assessed for association with type 2 diabetes in two independently ascertained collections of Caucasian subjects with type 2 diabetes and two control groups. Association is observed between multiple SNPs and type 2 diabetes. The most consistent evidence for association occurred with SNPs spanning the 3′ end of intron 1 of PTPN1 through intron 8 (P values ranging from 0.043 to 0.004 in one case-control set and 0.038–0.002 in a second case-control set). Analysis of the combined case-control data increased the evidence of SNP association with type 2 diabetes (P = 0.005–0.0016). All of the associated SNPs lie in a single 100-kb haplotype block that encompasses the PTPN1 gene. Analysis of haplotypes indicates a significant difference between haplotype frequencies in type 2 diabetes case and control subjects (P = 0.0035–0.0056), with one common haplotype (36%) contributing strongly to the evidence for association with type 2 diabetes. Odds ratios calculated from single SNP or haplotype data are in the proximity of 1.3. Haplotype-based calculation of population-attributable risk (PAR) results in an estimated PAR of 17–20% based on different models and assumptions. These results suggest that PTPN1 is a significant contributor to type 2 diabetes susceptibility in the Caucasian population. This risk is likely due to noncoding polymorphisms.