Cloning of the cDNA encoding a novel human protein- tyrosine phosphatase (PTP) called islet cell antigen-related PTP (IAR) predicts a receptor-like molecule with an extracellular domain of 614 amino acids containing a hydrophobic signal peptide, one potential N-glycosylation site, and an RGDS peptide which is a possible adhesive recognition sequence. The 376-amino acid intracellular region contains a single catalytic domain. Recombinant IAR polypeptide has phosphatase activity. Northern blot analysis shows tissue-specific expression of two IAR transcripts of 5.5 and 3. 7 kilobases, which are most abundant in brain and pancreas. The IAR PTP is homologous in its intracellular region to IA-2, a putative PTP that is an insulin-dependent diabetes mellitus (IDDM) autoantigen. IAR is also reactive with IDDM patient sera. IAR and IA-2 may distinguish different populations of IDDM autoantibodies since they identify overlapping but nonidentical sets of IDDM patients. Thus IAR is likely to be an islet cell antigen useful in the preclinical screening of individuals for risk of IDDM.