This proposal aims to develop fragment-based methodology toward the identification of phosphatase inhibitors. The method to be developed consists of three steps: (1) a library of O-aryl phosphates with diverse, low molecular weight O-aryl groups is screened to identify phosphatase substrates using a simple spectrophotometric-based assay, (2) the identified O-aryl phosphate substrates are optimized by rapid analogue synthesis and evaluation, and (3) the optimized substrates are converted to inhibitors by direct replacement of the phosphate with known phosphate isosteres. To develop the methodology, protein tyrosine 1B (PTP1B), a phosphatase implicated in diabetes, will be targeted. Phosphatases have been shown to enhance disease states in several maladies including osteoporosis, immune diseases, cancer, Alzheimer's disease, diabetes, and obesity. In particular, PTP1B is a well- validated target in the treatment of type 2 diabetes. Inhibition of PTP1B has been shown to aid in the treatment of diabetes in mice without side effects. While PTP1B is being pursued as an initial target, the methodology will be applicable to a large number of phosphatases involved in a variety of diseases. Finding inhibitors of PTP1B using commonly adopted combinatorial methods has not been without difficulty. Particularly troublesome is the high number of false positives obtained in screens against PTP1B. The methodology proposed will directly address the pitfalls found with alternative methodologies toward phosphatase inhibitor design. The proposed methodology will enable the generation of inhibitors toward families of phosphatase enzymes. Phosphatases have been implicated in a number of diseases including osteoporosis, immune diseases, cancer, Alzheimer's disease, diabetes, and obesity. Initial efforts will be focused on development of inhibitors toward a phosphatase involved in type 2 diabetes. Phosphatase inhibitors generated from this methodology could provide starting points for the development of Pharmaceuticals against a number of serious maladies. [unreadable] [unreadable] [unreadable]