Growing evidence indicates that endogenously produced hydrogen peroxide acts as a cellular signaling molecule that (among other things) can regulate the activity of some protein phosphatases. Recent X-ray crystallographic studies revealed an unexpected chemical transformation underlying the redox regulation of protein tyrosine phosphatase 1B, in which oxidative inactivation of the enzyme yields an intrastrand protein cross-link between the catalytic cysteine residue and its neighboring amide nitrogen. This work describes a small organic molecule that serves as an effective model for the redox-sensing assembly of functional groups at the active site of PTP1B. Findings obtained using this model system suggest that the oxidative transformation of PTP1B to its "crosslinked" inactive form can proceed directly via oxidation of the active-site cysteine to a sulfenic acid (RSOH). The remarkably facile nature of this protein cross-link-forming reaction, along with the widespread cellular occurrence of protein sulfenic acids generated via oxidation of cysteine residues, suggests that the type of oxidative protein cross-link formation first seen in the context of PTP1B represents a potentially general mechanism for redox "switching" of protein function. Thus, the chemistry characterized here could have broad relevance to both redox-regulated signal transduction and the toxic effects of oxidative stress.