PTP1B is a classical non-transmembrane protein tyrosine phosphatase that plays a key role in metabolic signaling and is a promising drug target for type 2 diabetes and obesity. Accumulating evidence also indicates that PTP1B is involved in cancer, but contrasting findings suggest that it can exert both tumor suppressing and tumor promoting effects depending on the substrate involved and the cellular context. In this review, we will discuss the diverse mechanisms by which PTP1B may influence tumorigenesis as well as recent in vivo data on the impact of PTP1B deficiency in murine cancer models. Together, these results highlight not only the great potential of PTP1B inhibitors in cancer therapy but also the need for a better understanding of PTP1B function prior to use of these compounds in human patients.