Protein tyrosine phosphatase 1beta (PTP1beta) acts as a negative regulator of insulin signaling. Selective inhibition of PTP1beta has served as a potential drug target for the treatment of type 2 diabetes mellitus. We evaluated the inhibitory effect of Phellinus linteus against PTP1beta as part of our ongoing search for natural therapeutic and preventive agents for diabetes mellitus. Fractions of the P. linteus extract were found to exhibit significant inhibitory activities against PTP1beta. In an attempt to identify bioactive components, we isolated, from the most active ethyl acetate fraction, five hispidin derivatives (phelligridimer A, davallialactone, hypholomine B, interfungins A, and inoscavin A) and four phenolic compounds (protocatechuic acid, protocatechualdehyde, caffeic acid, and ellagic acid). The chemical structures of these compounds were elucidated from spectroscopic evidence and by comparison with published data. All the compounds strongly inhibited PTP1beta activity in an in vitro assay; their IC50 values ranged from 9.0 +/- 0.01 to 58.2 +/- 0.3 microM. Our results indicated that the hispidin skeleton may be an important moiety for inhibitory activity of the above compounds against PTP1beta. Thus, hispidin derivatives could be a potent new class of natural PTP1beta inhibitors.