Obesity and metabolic syndrome represent major public health problems, and are the biggest preventable causes of death worldwide. Obesity is the leading risk factor for type 2 diabetes mellitus (T2DM), cardiovascular diseases and non-alcoholic fatty liver disease. Obesity-associated insulin resistance, which is characterized by reduced uptake and utilization of glucose in muscle, adipose and liver tissues, is a key predictor of metabolic syndrome and T2DM. With increasing prevalence of obesity in adults and children, the need to identify and characterize potential targets for treating metabolic syndrome is imminent. Emerging evidence from animal models, clinical studies and cell lines studies suggest that protein tyrosine phosphatase 1B (PTP1B), an enzyme that negatively regulates insulin signaling, is likely to be involved in the pathways leading to insulin resistance. PTP1B is tethered to the cytosolic surface of endoplasmic reticulum (ER), an organelle that is responsible for folding, modification, and trafficking of proteins. Recent evidence links the disruption of ER homeostasis, referred to as ER stress, to the pathogenesis of obesity and T2DM. PTP1B has been recognized as an important player linking ER stress and insulin resistance in obese subjects. This review highlights recent advances in the research related to the role of PTP1B in signal transduction processes implicated in pathophysiology of obesity and type 2 diabetes, and focuses on the potential therapeutic exploitation of PTP1B inhibitors for the management of these conditions.