Suppression of the expression of the heterotrimeric G-protein Galpha(i2) in vivo has been shown to provoke insulin resistance, whereas enhanced insulin signaling is observed when Galpha(i2) is overexpressed in vivo. The basis for Galpha(i2) regulation of insulin signaling was explored in transgenic mice with targeted expression of the GTPase-deficient, constitutively active Q205L Galpha(i2) in fat and skeletal muscle. Phosphorylation of insulin receptor and IRS-1 in response to insulin challenge in vivo was markedly amplified in fat and skeletal muscle expressing Q205L Galpha(i2). The expression and activity of the protein-tyrosine phosphatase 1B (PTP1B), but not protein-tyrosine phosphatases SHP-1, SHP-2, and LAR, were constitutively decreased in tissues expressing the Q205L Galpha(i2), providing a direct linkage between insulin signaling and Galpha(i2). The loss of PTP1B expression may explain, in part, the loss of PTP1B activity in the iQ205L transgenic mice. Activation of Galpha(i2) in mouse adipocytes with lysophosphatidic acid was shown to decrease PTP1B activity, whereas pertussis toxin inactivates Galpha(i2), blocks lysophosphatidic acid-stimulated inhibition of PTP1B activity, and blocks tonic suppression of PTP1B activity by Galpha(i2). Elevation of intracellular cAMP in fat cells is shown to increase PTP1B activity, whereas either depression of cAMP levels or direct activation of Galpha(i2) suppresses PTP1B. These data provide the first molecular basis for the interplay between Galpha(i2) and insulin signaling, i.e. activation of Galpha(i2) can suppress both the expression and activity of PTP1B in insulin-sensitive tissues.