Common obesity is primarily characterized by resistance to the actions of the hormone leptin. Mice deficient in protein tyrosine phosphatase 1B (PTP1B) are resistant to diabetes and diet-induced obesity, prompting us to further define the relationship between PTP1B and leptin in modulating obesity. Leptin-deficient (Lep^ob/ob) mice lacking PTP1B exhibit an attenuated weight gain, a decrease in adipose tissue, and an increase in resting metabolic rate. Furthermore, PTP1B-deficient mice show an enhanced response toward leptin-mediated weight loss and suppression of feeding. Hypothalami from these mice also display markedly increased leptin-induced Stat3 phosphorylation. Finally, substrate-trapping experiments demonstrate that leptin-activated Jak2, but not Stat3 or the leptin receptor, is a substrate of PTP1B. These results suggest that PTP1B negatively regulates leptin signaling, and provide one mechanism by which it may regulate obesity.