We have developed an intact cell assay to be used in the direct quantitation of protein tyrosine phosphatase (PTP) activity. Utilizing the baculovirus expression system, the assay readily allows for a direct activity readout for PTPs such as PTP1B or CD45. Infected Sf9 cells expressing either full-length PTP1B, full-length CD45, CD45 catalytic domain, or hCOX-1 (mock-infected) are harvested 29 hr post-infection, at which time cells are viable and the expressed proteins are processed, as well as localized to their predicted subcellular compartments. Assays are carried out in a 96-well format, with cells expressing the PTP of interest. Cells are preincubated with or without inhibitor and challenged with substrate, and the phosphatase activity is determined spectrophotometrically by monitoring the conversion of p-nitrophenyl phosphate to p-nitrophenol at OD405. Documented PTP inhibitors have been used to validate this assay system. This study demonstrates that a direct readout of PTP activity in intact cells can be achieved, thus providing a useful cell-based screen for determining selective inhibitors of PTPs.