High levels of striatal-enriched protein tyrosine phosphatase (STEP) activity are observed in a number of neuropsychiatric disorders such as Alzheimer's disease. Overexpression of STEP results in the dephosphorylation and inactivation of many key neuronal signaling molecules, including ionotropic glutamate receptors. Moreover, genetically reducing STEP levels in AD mouse models significantly reversed cognitive deficits and decreased glutamate receptor internalization. These results support STEP as a potential target for drug discovery for the treatment of Alzheimer's disease. Herein, a substrate-based approach for the discovery and optimization of fragments called substrate activity screening (SAS) has been applied to the development of low molecular weight (<450 Da) and nonpeptidic, single-digit micromolar mechanism-based STEP inhibitors with greater than 20-fold selectivity across multiple tyrosine and dual specificity phosphatases. Significant levels of STEP inhibition in rat cortical neurons are also observed.