Reaction of radicals in the presence of O2, or singlet oxygen, with some amino acids, peptides, and proteins yields hydroperoxides. These species are key intermediates in chain reactions and protein damage. They can be detected in cells and are poorly removed by enzymatic defenses. Previously we have shown that peptide and protein hydroperoxides react rapidly with thiols, with this resulting in inactivation of some thiol-dependent enzymes. In light of these data, we hypothesized that inactivation of protein tyrosine phosphatases (PTPs), by hydroperoxides present on oxidized proteins, may contribute to cellular and tissue dysfunction by modulation of phosphorylation-dependent cell signaling. We show here that PTPs in cell lysates, and purified PTP-1B, are inactivated by amino acid, peptide, and protein hydroperoxides in a concentration- and structure-dependent manner. Protein hydroperoxides are particularly effective, with inhibition occurring with greater efficacy than with H2O2. Inactivation involves reaction of the hydroperoxide with the conserved active-site Cys residue of the PTPs, as evidenced by hydroperoxide consumption measurements and a diminution of this effect on blocking the Cys residue. This inhibition of PTPs, by oxidized proteins containing hydroperoxide groups, may contribute to cellular dysfunction and altered redox signaling in systems subject to oxidative stress.