Using an NMR-based fragment screening and X-ray crystal structure-based assembly, starting with millimolar ligands for both the catalytic site and the second phosphotyrosine binding site, we have identified a small-molecule inhibitor of protein tyrosine phosphatase 1B with low micromolar inhibition constant, high selectivity (30-fold) over the highly homologous T-cell protein tyrosine phosphatase, and good cellular activity in COS-7 cells.