To elucidate the roles of SHP-2, we generated transgenic (Tg) mice expressing a dominant negative mutant lacking protein tyrosine phosphatase domain (DeltaPTP). On examining two lines of Tg mice identified by Southern blot, the transgene product was expressed in skeletal muscle, liver, and adipose tissues, and insulin-induced association of insulin receptor substrate 1 with endogenous SHP-2 was inhibited, confirming that DeltaPTP has a dominant negative property. The intraperitoneal glucose loading test demonstrated an increase in blood glucose levels in Tg mice. Plasma insulin levels in Tg mice after 4 h fasting were 3 times greater with comparable blood glucose levels. To estimate insulin sensitivity by a constant glucose, insulin, and somatostatin infusion, steady state blood glucose levels were higher, suggesting the presence of insulin resistance. Furthermore, we observed the impairment of insulin-stimulated glucose uptake in muscle and adipocytes in the presence of physiological concentrations of insulin. Moreover, tyrosine phosphorylation of insulin receptor substrate-1 and stimulation of phosphatidylinositol 3-kinase and Akt kinase activities by insulin were attenuated in muscle and liver. These results indicate that the inhibition of endogenous SHP-2 function by the overexpression of a dominant negative mutant may lead to impaired insulin sensitivity of glucose metabolism, and thus SHP-2 may function to modulate insulin signaling in target tissues.