The protein tyrosine phosphatase 1B (PTP1B) is an attractive target for the treatment of type 2 diabetes. A series of substituted 1, 3 benzyl urea has been synthesized and evaluated for PTP1B inhibitory, antidiabetic and antidyslipidemic activities. The most active compound of the series 5b showed 79.4% PTP1B inhibition and 20.7% blood glucose lowering in STZ model. It also lowered the serum cholesterol level by 16.3 % and significantly increased the serum HDL-cholesterol by 46.8%. The high activity of the compound 5b.has been explained by docking studies.