Protein tyrosine phosphatase 1B (PTP1B) inhibition increases insulin sensitivity and normalizes blood glucose levels in animals. The molecular events associated with PTP1B inhibition that increase insulin sensitivity remain controversial. Insulin resistant, diabetic ob/ob mice, dosed with PTP1B antisense for 3 weeks exhibited a decrease in PTP1B protein levels and a change in the expression level of p85alpha isoforms in liver, characterized by a reduction in p85alpha and an upregulation of the p50alpha and p55alpha isoforms. Transfection of mouse hepatocytes with PTP1B antisense caused a downregulation PTP1B and p85alpha protein levels. Furthermore, transfection of mouse hepatocytes with PTP1B siRNA downregulated p85alpha protein expression and enhanced insulin-induced PKB phosphorylation. Treatment of mouse hepatocytes with p85alpha antisense oligonucleotide caused a reduction of p85alpha and an increase in p50alpha and p55alpha isoforms and enhanced insulin-stimulated PKB activation. These results demonstrate that PTP1B inhibition causes a direct differential regulation of p85alpha isoforms of PI3-kinase in liver and that reduction of p85alpha may be one mechanism by which PTP1B inhibition improves insulin sensitivity and glucose metabolism in insulin-resistant states.