Organovanadium compounds have been shown to be insulin sensitizers in vitro and in vivo. One potential biochemical mechanism for insulin sensitization by these compounds is that they inhibit protein tyrosine phosphatases (PTPs) that negatively regulate insulin receptor activation and signaling. In this study, bismaltolato oxovanadium (BMOV), a potent insulin sensitizer, was shown to be a reversible, competitive phosphatase inhibitor that inhibited phosphatase activity in cultured cells and enhanced insulin receptor activation in vivo. NMR and X-ray crystallographic studies of the interaction of BMOV with two different phosphatases, HCPTPA (human low molecular weight cytoplasmic protein tyrosine phosphatase) and PTP1B (protein tyrosine phosphatase 1B), demonstrated uncomplexed vanadium (VO(4)) in the active site. Taken together, these findings support phosphatase inhibition as a mechanism for insulin sensitization by BMOV and other organovanadium compounds and strongly suggest that uncomplexed vanadium is the active component of these compounds.