The phosphotyrosine-mimicking amino acid Fmoc-Tyr(malonyl-di-OtBu)-OH can be used as a building block for the synthesis of cell-permeable protein tyrosine phosphatase (PTP) inhibitors. The effect of a malonyl-tyrosine containing peptide on PTP 1B catalyzed insulin receptor dephosphorylation has been examined and it was shown that this peptide inhibited PTP 1B 20 times more potently than the corresponding phosphotyrosine containing peptide.