Screening of the NCI diversity set of compounds has led to the identification of 5 (NSC-117199), which inhibits the protein tyrosine phosphatase (PTP) Shp2 with an IC50 of 47 μM. A focused library incorporating an isatin scaffold was designed and evaluated for inhibition of Shp2 and Shp1 PTP activities. Several compounds were identified that selectively inhibit Shp2 over Shp1 and PTP1B with low to submicromolar activity. A model for the binding of the active compounds is proposed.