A recent addition to the list of widely confirmed type 1 diabetes risk loci is the PTPN22 gene encoding a lymphoid-specific phosphatase (Lyp). However, evidence supporting a role for PTPN22 in type 1 diabetes derives entirely from the study of just one coding single nucleotide polymorphism, 1858C/T. In the current study, the haplotype structure of the PTPN22 region was determined, and individual haplotypes were tested for association with type 1 diabetes in family-based tests. The 1858T risk allele occurred on only a single haplotype that was strongly associated with type 1 diabetes (P = 7.9 x 10(-5)). After controlling for the effects of this allele, two other haplotypes were observed to be weakly associated with type 1 diabetes (P < 0.05). Sequencing of the coding region of PTPN22 on these haplotypes revealed a novel variant (2250G/C) predicted to result in a nonsynonymous amino acid substitution. Analysis of PTPN22 transcripts from a subject heterozygous for this variant indicated that it interfered with normal mRNA splicing, resulting in a premature termination codon after exon 17. These results support the conclusion that the 1858C/T allele is the major risk variant for type 1 diabetes in the PTPN22 locus, but they suggest that additional infrequent coding variants at PTPN22 may also contribute to type 1 diabetes risk.