Protein tyrosine phosphatases (PTPs) play vital roles in numerous cellular processes and are implicated in a growing number of human diseases, ranging from cancer to cardiovascular, immunological, infectious, neurological, and metabolic diseases. Here we present methods for developing small molecule inhibitors for these enzymes, starting with how to set up a high throughput chemical library screening for PTP inhibitors, how to confirm and prioritize hits, and how to circumnavigate possible pitfalls. Next, we present the relatively new hit generating method of in silico or virtual screening. We give an overview of existing software tools, describe how to choose and generate protein target structures and illustrate the procedure with examples. We then discuss how three-dimensional PTP structures can be analyzed in terms of their potential to bind small molecule inhibitors selectively over homologous proteins and how computer tools can be applied for lead optimization efforts. We finish with a perspective of how well these PTP inhibitors might perform as future drugs to treat human disease.