As important regulators of cellular signal transduction, members of the protein tyrosine phosphatase (PTP) family are considered to be promising drug targets. However, to date, the most effective in vitro PTP inhibitors have tended to be highly charged, thus limiting cellular permeability. Here, we have identified an uncharged thioxothiazolidinone derivative (compound 1), as a competitive inhibitor of a subset of PTPs. Compound 1 effectively inhibited protein tyrosine phosphatase 1B (PTP1B) in two cell-based systems: it sensitized wild-type, but not PTP1B-null fibroblasts to insulin stimulation and prevented PTP1B-dependent dephosphorylation of the FLT3-ITD receptor tyrosine kinase. We have also tested a series of derivatives in vitro against PTP1B and proposed a model of the PTP1B-inhibitor interaction. These compounds should be useful in the elucidation of cellular PTP function and could represent a starting point for development of therapeutic PTP inhibitors.