Structural analyses of the protein-tyrosine phosphatase 1B (PTP1B) active site and inhibitor complexes have aided in optimization of a peptide inhibitor containing the novel (S)-isothiazolidinone (IZD) phosphonate mimetic. Potency and permeability were simultaneously improved by replacing the polar peptidic backbone of the inhibitor with nonpeptidic moieties. The C-terminal primary amide was replaced with a benzimidazole ring, which hydrogen bonds to the carboxylate of Asp 48 , and the N terminus of the peptide was replaced with an aryl sulfonamide, which hydrogen bonds to Asp 48 and the backbone NH of Arg 47 via a water molecule. Although both substituents retain the favorable hydrogen bonding network of the peptide scaffold, their aryl rings interact weakly with the protein. The aryl ring of benzimidazole is partially solvent exposed and only participates in van der Waals interactions with Phe 182 of the flap. The aryl ring of aryl sulfonamide adopts an unexpected conformation and only participates in intramolecular -stacking interactions with the benzimidazole ring. These results explain the flat SAR for substitutions on both rings and the reason why unsubstituted moieties were selected as candidates. Finally, substituents ortho to the IZD heterocycle on the aryl ring of the IZD-phenyl moiety bind in a small narrow site adjacent to the primary phosphate binding pocket. The crystal structure of an o-chloro derivative reveals that chlorine interacts extensively with residues in the small site. The structural insights that have led to the discovery of potent benzimidazole aryl sulfonamide o-substituted derivatives are discussed in detail.Type II diabetes, also known as non-insulin-dependent diabetes mellitus, is characterized by a deficiency in insulin signaling despite normal or greatly elevated levels of insulin. Although the cause of insulin resistance is unknown, inhibiting enzymes that negatively regulate the signaling pathway may restore insulin responsiveness. Protein-tyrosine phosphatase 1B (PTP1B), 2 a key negative regulator of insulin signaling, has emerged as an attractive target for the treatment of type II diabetes. PTP1B directly inactivates the insulin receptor (IR) by dephosphorylating tyrosine residues in the regulatory domain (1, 2) and its overexpression inhibits IR signaling (3). The most convincing evidence for its potential use as a therapeutic target, however, is that PTP1B knock-out mice (4) and those injected with an antisense oligonucleotide (5, 6) displayed increased insulin sensitivity.A number of PTP1B inhibitors containing highly charged non-hydrolyzable phosphonate mimetics have been reported (7-13). Poor membrane permeability, however, has limited their development as drug candidates. The lack of inhibitors with suitable physicochemical properties can be attributed to the need to interact with the highly positively charged primary phosphate binding pocket and the surrounding flat, solventexposed region.We have recently reported the structure-based design of a novel isothiazolidino...