PTP1B is a protein tyrosine-phosphatase located on the cytosolic side of the endoplasmic reticulum that plays an important role in the regulation of the insulin receptor (IR). Replacement of the conserved Asp-181 by alanine is known to convert PTP1B into a substrate-trapping protein that binds to but cannot dephosphorylate its substrates. In this work, we have studied the effect of an additional mutation (Y46F) on the substrate-trapping efficiency of PTP1B-D181A. We observed that this mutation converts PTP1B-D181A into a highly efficient substrate-trapping mutant, resulting in much higher recovery of tyrosine-phosphorylated proteins coimmunoprecipitated with PTP1B. Bioluminescence resonance energy transfer (BRET) experiments were also performed to compare the dynamics of interaction of the IR with these mutants. Basal BRET, which mainly reflects the interaction of PTP1B with the IR precursor during its biosynthesis in the endoplasmic reticulum, was markedly increased with the PTP1B-D181A-Y46F mutant. In contrast, insulin-induced BRET was markedly reduced with PTP1B-D181A-Y46F. I(125) insulin binding experiments indicated that PTP1B-D181-Y46F reduced the expression of IR at the plasma membrane. Reduced expression at the cell surface was associated with higher amounts of the uncleaved IR precursor in the cell. Moreover, we observed that substantial amounts of the uncleaved IR precursor reached the Tris-phosphorylated, fully activated form in an insulin independent fashion. These results support the notion that PTP1B plays a crucial role in the control of the activity of the IR precursor during its biosynthesis. In addition, this new substrate-trapping mutant may be a valuable tool for the identification of new PTP1B substrates.