Many studies have illustrated that the production of reactive oxygen species (ROS) is important for optimal tyrosine phosphorylation and signaling in response to diverse stimuli. Protein-tyrosine phosphatases (PTPs), which are important regulators of signal transduction, are exquisitely sensitive to inhibition after generation of ROS, and reversible oxidation is becoming recognized as a general physiological mechanism for regulation of PTP function. Thus, production of ROS facilitates a tyrosine phosphorylation-dependent cellular signaling response by transiently inactivating those PTPs that normally suppress the signal. In this study, we have explored the importance of reversible PTP oxidation in the signaling response to insulin. Using a modified ingel PTP assay, we show that stimulation of cells with insulin resulted in the rapid and transient oxidation and inhibition of two distinct PTPs, which we have identified as PTP1B and TC45, the 45-kDa spliced variant of the T cell protein-tyrosine phosphatase. We investigated further the role of TC45 as a regulator of insulin signaling by combining RNA interference and the use of substrate-trapping mutants. We have shown that TC45 is an inhibitor of insulin signaling, recognizing the beta-subunit of the insulin receptor as a substrate. The data also suggest that this strategy, using ligand-induced oxidation to tag specific PTPs and using interference RNA and substrate-trapping mutants to illustrate their role as regulators of particular signal transduction pathways, may be applied broadly across the PTP family to explore function.