The oxidation and inactivation of protein tyrosine phosphatases is one mechanism by which reactive oxygen species influence tyrosine phosphorylation‐dependent signaling events and exert their biological functions. In the present study, we determined the redox status of endogenous protein tyrosine phosphatases in HepG2 and A431 human cancer cells, in which reactive oxygen species are produced constitutively. We used mass spectrometry to assess the state of oxidation of the catalytic cysteine residue of endogenous PTP1B and show that this residue underwent both reversible and irreversible oxidation to high stoichiometry in response to intrinsic reactive oxygen species production. In addition, our data show that the oxidation of PTP1B is specific to the active site Cys, with the other Cys residues in the protein remaining in a reduced state. Treatment of these cells with diphenyleniodonium, an inhibitor of NADPH oxidases, decreased reactive oxygen species levels. This resulted in inhibition of protein tyrosine phosphatase oxidation, concomitant with decreased tyrosine phosphorylation of cellular proteins and inhibition of anchorage‐independent cell growth. Therefore, our data also suggest that the high level of intrinsic reactive oxygen species may contribute to the transformed phenotype of HepG2 and A431 cells via constitutive inactivation of cellular protein tyrosine phosphatases.