Abstract Allergic inflammation is orchestrated by an intricate cellular communication network operated by cytokines. Members of protein tyrosine phosphatase family are potentially critical in balancing cytokine-triggered cellular activation. However, virtually nothing is known about function of specific tyrosine phosphatases in immune-mediated diseases. We interrogated role of protein tyrosine phosphatase PTP1B during allergic inflammation using ovalbumin asthma models in PTP1B KO and WT mice. Flow cytometry and intravital microscopy were used to characterize trafficking of leukocytes to the lung. In this study, we observed exaggerated allergen-driven eosinophilopoiesis and early-induced alterations in leukocyte recruitment to the lungs of KO mice. Intravital microscopy revealed profound differences in kinetics of leukocyte binding to endothelium between challenged WT (in hours) and KO mice (in minutes). In concert with stimulated eosinophilopoiesis and enhanced leukocyte trafficking, there was an increase in eotaxins and a number of Th2 and tissue-derived cytokines in KO mice compared to WT mice. Eosinophils and mast cells cultured from bone marrow of PTP1B KO mice exhibited cytokine-induced hyperproliferation, hyperactivation, as well as an increased chemotaxis and upregulation of markers for migration. In summary, phosphatase PTP1B is a critical endogenous negative regulator of inflammation and a possible target for cytokine-oriented therapies in asthma.