Protein tyrosine phosphatases (PTPs) are important signaling enzymes that control such fundamental processes as proliferation, differentiation, survival/apoptosis, as well as adhesion and motility. Potent and selective PTP inhibitors serve not only as powerful research tools, but also as potential therapeutics against a variety illness including cancer and diabetes. PTP activity-based assays are widely used in high throughput screening (HTS) campaigns for PTP inhibitor discovery. These assays suffer from a major weakness, in that the reactivity of the active site Cys can cause serious problems as highly reactive oxidizing and alkylating agents may surface as hits. We describe the development of a fluorescence polarization (FP)-based displacement assay that makes the use of an active site Cys to Ser mutant PTP (e.g., PTP1B/C215S) that retains the wild-type binding affinity. The potency of library compounds is assessed by their ability to compete with the fluorescently labeled active site ligand for binding to the Cys to Ser PTP mutant. Finally, the substitution of the active site Cys by a Ser renders the mutant PTP insensitive to oxidation and alkylation and thus will likely eliminate "false" positives due to modification of the active site Cys that destroy the phosphatase activity.