We investigated the role of protein tyrosine phosphatase 1B (PTP1B) in mammary tumorigenesis using both genetic and pharmacological approaches. It has been previously shown that transgenic mice with a deletion mutation in the region of Erbb2 encoding its extracellular domain (referred to as NDL2 mice, for 'Neu deletion in extracellular domain 2') develop mammary tumors that progress to lung metastasis. However, deletion of PTP1B activity in the NDL2 transgenic mice either by breeding with Ptpn1-deficient mice or by treatment with a specific PTP1B inhibitor results in significant mammary tumor latency and resistance to lung metastasis. In contrast, specific overexpression of PTP1B in the mammary gland leads to spontaneous breast cancer development. The regulation of ErbB2-induced mammary tumorigenesis by PTB1B occurs through the attenuation of both the MAP kinase (MAPK) and Akt pathways. This report provides a rationale for the development of PTP1B as a new therapeutic target in breast cancer.