PTP1B is a protein tyrosine-phosphatase predominantly located on the cystosolic surface of the endoplasmic reticulum. This tyrosine-phosphatase plays a major role in the regulation of the activity of the insulin receptor (IR). We have studied the interaction of the IR with PTP1B in living cells using bioluminescence resonance energy transfer (BRET). The IR was fused to Renilla luciferase and a substrate-trapping mutant of PTP1B was fused to the yellow variant of the green fluorescent protein (YFP). When the two partners interacted, an energy transfer occurred between the luciferase and the YFP, and a fluorescent signal, emitted by the YFP, could be detected. The interaction of the IR with PTP1B could be monitored in real time for more than 30 min. Insulin rapidly and dose-dependently stimulated this interaction. The basal (insulin-independent) interaction of IR with PTP1B was much lower with a soluble form than with the endoplasmic reticulum-targeted form of PTP1B, indicating that this basal interaction mainly occurred in the endoplasmic reticulum. In the basal state, PTP1B and the IR indeed co-localized in the endoplasmic reticulum, as demonstrated by confocal microscopy and cell fractionation experiments. Moreover, inhibition of IR processing with tunicamycin indicated that the basal interaction of PTP1B with IR occurred during biosynthesis of the IR precursor in the endoplasmic reticulum. These results strongly suggest that PTP1B not only dephosphorylates the insulin receptor that has been activated by insulin, but also regulates the insulin receptor precursor during its biosynthesis. Localisation of PTP1B to the endoplasmic reticulum may be important to prevent insulin-independent autonomous activity of the immature insulin receptor precursor.