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A three dimensional chemical feature based pharmacophore model was developed for the inhibitors of protein tyrosine phosphatase 1B (PTP1B) using the CATALYST software, which would provide useful knowledge for performing virtual screening to identify new inhibitors targeted toward type II diabetes and obesity. A dataset of 27 inhibitors, with diverse structural properties, and activities ranging from 0.026 to 600 microM, was selected as a training set. Hypol, the most reliable quantitative four featured pharmacophore hypothesis, was generated from a training set composed of compounds with two H-bond acceptors, one hydrophobic aromatic and one ring aromatic features. It has a correlation coefficient, RMSD and cost difference (null cost-total cost) of 0.946, 0.840 and 65.731, respectively. The best hypothesis (Hypol) was validated using four different methods. Firstly, a cross validation was performed by randomizing the data using the Cat-Scramble technique. The results confirmed that the pharmacophore models generated from the training set were valid. Secondly, a test set of 281 molecules was scored, with a correlation of 0.882 obtained between the experimental and predicted activities. Hypol performed well in correctly discriminating the active and inactive molecules. Thirdly, the model was investigated by mapping on two PTP1B inhibitors identified by different pharmaceutical companies. The Hypol model correctly predicted these compounds as being highly active. Finally, docking simulations were performed on few compounds to substantiate the role of the pharmacophore features at the binding site of the protein by analyzing their binding conformations. These multiple validation approaches provided confidence in the utility of this pharmacophore model as a 3D query for virtual screening to retrieve new chemical entities showing potential as potent PTP1B inhibitors.