One strategy to treat the insulin resistance that is central to type II diabetes mellitus may be to maintain insulin receptors (IR) in the active (tyrosine phosphorylated) form. Because protein tyrosine phosphatase 1B (PTP1B) binds and subsequently dephosphorylates IR, inhibitors of PTP1B-IR binding are potential insulin 'sensitizers.' A Scintillation Proximity Assay (SPA) was developed to characterize and quantitate PTP1B-IR binding. Human IR were solubilized and captured on wheat germ agglutinin (WGA)-coated SPA beads. Subsequent binding of human, catalytically inactive [35S] PTP1B Cys(215)/Ser (PTP1B(C215S)) to the lectin-anchored IR results in scintillation from the SPA beads that can be quantitated. Binding of PTP1B to IR was pH- and divalent cation-sensitive. Ca(2+) and Mn(2+), but not Mg(2+), dramatically attenuated the loss of PTP1B-IR binding observed when pH was raised from 6.2 to 7.8. PTP1B binding to IR from insulin-stimulated cells was much greater than to IR from unstimulated cells and was inhibited by either an antiphosphotyrosine antibody or treatment of IR with alkaline phosphatase, suggesting that tyrosine phosphorylation of IR is required for PTP1B binding. Phosphopeptides modeled after various IR phosphotyrosine domains each only partially inhibited PTP1B-IR binding, indicating that multiple domains of IR are likely involved in binding PTP1B. However, competitive displacement of [35S]PTP1B(C215S) by PTP1B(C215S) fitted best to a single binding site with a K(d) in the range 100-1000 nM, depending upon pH and divalent cations. PNU-200898, a potent and selective inhibitor of PTP1B whose orientation in the active site of PTP1B has been solved, competitively inhibited catalysis and PTP1B-IR binding with equal potency. The results of this novel assay for PTP1B-IR binding suggest that PTP1B binds preferentially to tyrosine phosphorylated IR through its active site and that binding may be susceptible to therapeutic disruption by small molecules.