Protein tyrosine phosphatase 1B (PTP1B), encoded by the PTPN1 gene, is a well‐known negative regulator of insulin signaling. Since insulin, via the activation of the insulin receptor, is involved in cholesterol synthesis by stimulating genes like HMG‐CoA reductase (HMGCR), we enquired whether PTP1B also played a role in the regulation of cholesterol homeostasis. Interestingly, knocking out PTP1B in hepatocytes, where most of the circulating cholesterol is synthesized, generates mice that have reduced circulating cholesterol levels. Moreover, SNPs in the human PTPN1 gene are associated with higher levels of low‐density lipoprotein cholesterol, total plasma cholesterol, and with the insulin sensitivity index and fasting glucose levels. As a first step, to better understand the function of PTP1B in cholesterol homeostasis, we used Mouse Embryonic Fibroblast (MEFs) cells derived from WT or PTP1B KO mice and measured cholesterol levels utilizing an Amplex red assay. As previously observed in liver PTP1B KO mice, we observed a ~ 50% decrease in cholesterol levels in PTP1B KO cells when compared to WT cells. Supporting this, Western blot analysis also indicated that proteins regulating cholesterol homeostasis are differently expressed in WT and KO MEFs at basal. We observed decreased expression of LDLR, PCSK9, HMGCR, SREBP1 and Cav‐1 in PTP1B KO cells. In addition, cholesterol treatment also showed a decreased adaptive response in PTP1B KO cells. Interestingly, Src, a substrate of PTP1B, was hyperphosphorylated in PTP1B KO MEFs treated with cholesterol and these cells were more sensitive to cholesterol‐induced toxicity as indicated by caspase‐3 cleavage at lower concentrations of cholesterol. Quantitative mass spectrometry analysis using isobaric tag for relative and absolute quantitation (iTRAQ) further revealed that several proteins involved in cholesterol homeostasis (e.g. NPC2, NPC1L1, DHCR7, NCEH1, ApoA, ApoB, ApoC, ApoE) were overexpressed in PTP1B KO MEFs. We also observed that proteins involved in retinoic acid homeostasis, which have also been involved in the regulation of insulin resistance and lipid homeostasis, were overexpressed in PTP1B KO MEFs. We are currently validating these findings and exploring underlying mechanisms by which PTP1B gene inactivation regulates cholesterol homeostasis in mammalian cells.