Protein tyrosine phosphatase 1B (PTP1B) functions by removing the phosphoryl group from tyrosinephosphorylated proteins in insulin signaling and metabolism. The regeneration of the active site involves a sulphenylamide intermediate derived from the intrastrand cross-linking between the catalytic serine and the neighboring backbone nitrogen. Two mechanisms have been proposed for the formation of the sulphenylamide intermediate and the subsequent reactivation of the catalytic site. In the current work, the proposed mechanisms have been investigated by the use of density functional theory calculations. Our results suggest that these two mechanisms have similar overall energy barriers and that the preferred route will be determined by the availability of hydrogen peroxide or other oxidizing reagents.