Recent studies from our laboratory have indicated that protein tyrosine phosphatase (PTPase) inhibitors can down‐modulate the tumor necrosis factor (TNF)‐mediated activation of the nuclear transcription factor NF‐xB in ML‐1a, a monocytic cell line (Singh and Aggarwal, J. Biol. Chem. 1995: 270: 10631). Since TNF is one of the major inducers of various adhesion molecules in human endothelial cells and their expression is known to require the activation of NF‐xB, we examined the effect of PTPase inhibitors on the TNF‐mediated induction of intracellular adhesion molecule (ICAM)‐1, vascular cell adhesion molecule (VCAM)‐1 and endothelial leukocyte adhesion molecule (ELAM)‐1. Like ML‐1a, human dermal microvessel endothelial cells (MVEC) treated with TNF rapidly activated (within 30 min) NF‐xB; this effect was completely abolished by co‐treatment with phenylarsine oxide (PAO), a specific inhibitor of PTPase. The induction of ICAM‐1, VCAM‐1, and ELAM‐1 by TNF in MVEC occurred within 6 h and was also completely down‐regulated by PAO in a dose‐dependent manner. PAO was found to be effective even when added 3 h after TNF, suggesting a rapid mode of action of this inhibitor. Besides PAO, other inhibitors of PTPase, including pervanadate and diamide, also blocked TNF‐dependent NF‐xB activation and induction of all the three adhesion proteins. Consistent with these results, the attachment of monocytes to MVEC was also blocked by the PTPase inhibitors. Thus, overall, our results demonstrate that a PTPase is involved either directly or indirectly in the pathway leading to the induction of endothelial cell adhesion molecules by TNF. Because of their role in cell adhesion, PTPase may provide a novel target of drug development for treatment of inflammation, atherogenesis, and tumor metastasis.