Protein tyrosine phosphatase 1B (PTP1B) is an effective target for the treatment of both type 2 diabetes and obesity; however, targeting PTP1B for drug discovery is challenging because of the highly conserved and positively charged active-site pocket. Tremendous progress has been made in the development of potent and selective PTP1B inhibitors that engage both the active site and no catalytic sites. Several strategies are being pursued to improve the pharmacological properties of PTP1B inhibitors. These new developments suggest that it is feasible to acquire PTP1B-based, small-molecule therapeutics with the requisite potency and selectivity. Future efforts will probably transform the potent and selective PTP1B inhibitors into orally available drugs with desirable physicochemical properties and in vivo efficacies.