Over the past two decades, the phosphatase PTP1B has been found to be a key regulator of signaling pathways triggered by the hormones insulin and leptin. Yet efforts to discover small molecules to treat diabetes and obesity by targeting the active site of PTP1B have thus far failed to produce candidates suitable for use as drugs. Using phage display and a mutant version of PTP1B that mimics the enzyme in its inactive oxidized conformation, Haque et al. isolated a single-chain variable fragment antibody (scFv) that stabilizes the inactive form of PTP1B, thereby inhibiting phosphatase activity. The scFv is functional in 293T cells, where it enhances cellular responses to insulin, as measured by phosphorylation of both insulin receptor and AKT, which is a downstream readout of the pathway. Moreover, data suggest that the scFv is specific to PTP1B and does not inhibit a closely related phosphatase. These results could spur efforts toward developing small-molecule drugs that mimic the conformation-stabilizing effects of the scFv. (Cell 147, 185–198, 2011)